12028581

Annual Report

it

Annu Report for the Year Ended December 31 2011

Universal Biosensors

Contents

Chairmans Lefter

CEO Report

Form 10-K

78 ASX Additionai nformation

BC Corporate Directory

2011 has been transiUonal

year for UBI as it moved

from technology start-up

company to companywhose technology platform

has been validated through

the launch of LifeScans

OneTouch VerioTM blood

glucose product across

Australia Europe and North

America and the formation

of strategic partnership

with Siemens Healthcare

Diagnostics Inc for

the development and

commercialisation of

products for the point-

of-care coagulation

testing market

Our world class capabilities have again been validated

by entering into further agreement with LifeScan for the

development of what will hopefully be their next generation

of products for the diabetes market

Over 2011 the company has significantly reduced the

technical risk of the products it is developing through the

hard work of our devoted management and staff

remain disappointed that the companys share price has

not in my view reflected the value created by the company

achieving significant commercial and technical milestones and

does not in my view reflect the inherent value in the company

The company and its management are focused on maximizing

value to shareholders and will be striving to do this

would like to thank the Board and the entire UBI team for

their efforts during the 2011 financial year and thank you our

shareholders for your continued support of our company

Yours faithfully

Andrew Denver

Chairman

Universal Biosensors Inc

2011 was an important year in the ongoing transition of UBI from technology innovator

to commercial enterprise UBIs blood glucose testing technology is now being sold in all

major world markets under the Onelouch VerioTM brand by LifeScan and new worldwide

partnership is in place with Siemens for point-of-care coagulation testing We ended the year

with solid cash balance growing product volumes and exciting new opportunities ahead

2011 was year of great progress in the development of the

UBI business as we continued to execute against important

elements of our strategy

LifeScan continued to demonstrate commitment to the Verb

technology with the continued roll-out of the OneTouch Verb

across Australia Europe and North America With global

strip sales accelerating Life5can continues to invest in the

development of new meter technology to complement the

UBI test strip and ensure that their customers receive the

features and benefits they are looking for Looking beyond

Vera 2011 also saw the start of an exciting new RDinitiative with LifeScan that demonstrates UBIs potential

as source of breakthrough nnovation in glucose testing

2011 also saw UBI step beyond the diabetes market with

the signing of an important new partnership with Siemens

Healthcare Diagnostics the world leader in diagnostics

and coagulation testing in particular The culmination of

an intensive business development effort UBI is delighted

to have partnered with Siemens in the area of point-of-

care coagulation testing worldwide strong business and

technical relationship has already been developed with

collaborative RDactivity underway on several fronts

This maior step forward for UBI further validates our

technology our business model and our capabilities

The diabetes-focused part of our business delivered positive

gross margin to UBI in 2011 while we continued to invest

RD resources in developing the coagulation testing products

and new platform technologies that will underpin future

earnings Our financial performance in 2011 reflected the

volatility inherent in the early stages of new product launch

with quarterly product revenues fluctuating significantly We

ended the year with solid fourth quarter of manufacturing

volume taking us out of the interim costing arrangement with

LifeScan and into profitable manufacturing Although LifeScan

have begun to manufacture Verio strips in their Inverness

facility we expect that UBIs manufacturing volumes in 2012

will nevertheless increase over 2011 levels reflecting the

growing demand for the Onelouch Verio product 2011

Service Revenues were down on 2010 due to slow down

in RD projects during the first part of the year but the new

technology feasibility program with Life5can will see return

to historical levels Against this backdrop the company

ended the year with solid cash balance and the prospect

of improved Verio-based revenues and RD milestone

payments in 2012

As we look to the future we continue to see exciting

opportunities in the point-of-care diagnostics field There

are two primary customer needs that are satisfied by point-

of-care diagnostics Firstly the need for rapid diagnosis to

support timely medical intervention and secondly the

improved convenience required to conduct frequent testing to

monitor or manage chronic disease or an ongoing therapy

The emergence of new cost-effective technologies that

support these needs is fuelling the growth of the point-of-care

market which is prolected to grow at double digit rates for

the foreseeable future Leading diagnostics companies are

embracing the potential of point-of-care diagnostics which

has been an area of high corporate activity internationally

and significant investment is being made across the globe

to find appropriate technology solutions We believe that UBI

has an important role to play in this field

Universal Biosensors Inc

Against this backdrop it is important that UBI continues to

invest its limited resources in the science engineering and

business process that will drive and accelerate our future

product revenues Looking ahead UBI will continue to pursue

the rapid exploitation of our platform electrochemical sensor

technology In partnering with Siemens IJBI has retained its

rights to pursue the emerging market tar patient self-testing

of PT-INR In 2012 we will look to leverage the investment

we have already made in RT-INR testing in this growth

market In addition to the important development work we

are undertaking with LifeScan and Siemens our internal RDfocus for 2012 will be on demonstrating our immunoassay

testing capability and further developing our concepts for

point-of-care molecular diagnostics product These are

important initiatives that will broaden the range of potential

tests that can be performed using our sensors

In summary 2012 will see 001

begin to benefit from continued growth in Verio

manufacturing volumes and quarterly service tees from

market expansion and accelerating Verb sales

cantirrue to innovate in partnership with LifeScan

delivering on our $4.5M new technology feasibility

program

deliver on our first milestones in creating world-leading

point-of-care coagulation testing products with Siemens

advance our plans for entering the PT-INR patient

self-test market

achieve important technical milestones in broadening our

immunoassay and molecular capabilities

2011 was an important year for UBI in which the company

delivered on range of key commercial milestones believe

201 wf be another exciting year for the team at UBI as we

continue our transition from innovative RD erganisation to

commercial success story

Yours faithfully

Paul Wright

Chief Executive Officer

Universal Biosmsrsors Inc

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington D.C 20549

FORM 10-KAnnual Report Pursuant To Section 13 or 15dof the Securities Exchange Act of 1934

For the fiscal year ended December 31 2011

OR

jj1 Transition Report Pursuant To Section 13 or 15dof the Securities Exchange Act of 1934

Commission File Number 000.52607

Universal Biosensors IncExact name of registrant as specified in its charter

Delaware 98.0424072

State or other jurisdiction of I.R.S Employer

incorporation or organization identification Number

Universal Biosensors Inc Telephone 61 9213 9000 Not Applicable

Corporate Avenue Registrants telephone number Zip Code

Rowville 3178 Victoria including area code

Australia

Address of principal

executive offices

Securities registered pursuant to Section 12b of the Act

Title of each class Name of each exchange on which registered

None Not applicable

Securities registered pursuant to Section 12g of the Act

Title of each class

Shares of common stock par value US$O.0001

Indicate by check mark if the registrant is well-known seasoned issuer as defined in Rule 405 of the Securities Act

Yes NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15d of the Act

Yesil NoIndicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15d of the

Securities Exchange Act of 1934 during the preceding 12 months or for such shorter period that the registrant was required to

file such reports and has been subject to suchfiling requirements for the past 90 days Yes No

Indicate by check mark whether the registranthas submitted

electronicallyand posted on its corporate Web site if any every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 232.405 of this chapter during the

preceding 12 months or for such shorter period that theregistrant was required to submit and post such files Yes No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein

and will not be contained to the best of registrants knowledge in definitive proxy or information statements incorporated by

reference in Part III of this Form 10-K or any amendment to this Form 10-K LI

Indicate by check mark whether theregistrant

is large accelerated filer an accelerated filer non-accelerated filer or

smaller reporting company See definitions of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company

Do not check if smaller reporting company

Indicate by check mark whether the registrant is shell company as defined in Rule 12b-2 of the Exchange ActYesLi No

The approximate aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant

was A$85662946 equivalent to US$91993437 as of June 30 2011

The number of shares outstanding of each of the registrants classes of common stock as of March 2012

Title of Class Number of Shares

Common Stock US$0001 par value 159146213

Documents incorporated by reference

Certain information contained in the registrants definitive Proxy Statement for the 2011 annual meetings of stockholders to be

filed not later than 120 days after the end of the fiscal year covered by this report is incorporated by reference into Part ifi hereof

Information contained on pages F-2 through F-36 of our Annual Report to Stockholders for the fiscal year ended

December 31 2011 is incorporated by reference in our response to Items 7A and 9A of Part II

TABLE OF CONTENTS

Pane

FORWARD-LOOKING STATEMENTS

PART

ITEM BUSINESS

iTEM 1A RISK FACTORS 10

ITEM lB UNRESOLVED STAFF COMMENTS 18

ITEM PROPERTIES 19

ITEM LEGAL PROCEEDINGS 19

ITEM MINE SAFETY DISCLOSURES 19

PART II

ITEM MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDERMATFERS AND ISSUER PURCHASES OF EQUITY SECURITIES 19

ITEM SELECTED FINANCIAL DATA 24

ITEM MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATION 25

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 25

ITEM FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 26

ITEM CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE 28

ITEM 9A CONTROLS AND PROCEDURES 28

ITEM 9B OTHER INFORMATION 31

PART III

ITEM 10 DIRECTORS EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 31

ITEM 11 EXECUTIVE COMPENSATION 31

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MAUERS 31

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORINDEPENDENCE 31

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES 32

PART 1Y

ITEM 15 EXHIBITS FINANCIAL STATEMENT SCHEDULES 32

SIGNATURES 37

Unless otherwise noted references on this Form 10-K to Universal Biosensors the Company Groupwe our or us means Universal Biosensors Inc Delaware corporation and when applicable its wholly

owned Australian operating subsidiary Universal Biosensors Pty Ltd Our principal place of business is located

at Corporate Avenue Rowville Victoria 3178 Australia Our telephone number is 61 9213 9000 Unless

otherwise noted all references in this Form 10-K to As or dollars and dollar amounts are references to

Australian dollars References to US$ are references to United States dollars

FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements that involve known and unknown risks uncertainties

and other factors that may cause our or our industrys actual results levels of activity performance or

achievements to be materially different from those anticipated by the forward-looking statements All statements

other than statements of historical facts are forward-looking statements Forward-looking statements include but

are not limited to statements about

our business and product development strategies

our expectations with respect to corporate collaborations or strategic alliances

our expectations with respect to the timing and amounts of revenues from our customers and partners

our expectations with respect to the services we provide to and the development projects we undertake

for our customers and partners

our expectations with respect to regulatory submissions approvals market launches of products we

develop or are involved in developing

our expectations with respect to sales of products we develop or are involved in developing and the

quantities of such products to be manufactured by us

our expectations with respect to our research and development programs the timing of product

development and our associated research and development expenses

the ability to protect our owned or licensed intellectual property and

our estimates regarding our capital requirements the sufficiency of our cash resources and our need for

additional financing

The words anticipates believes continue estimates expects intends may plans

potential projects should will would and similar expressions are intended to identify forward-

looking statements although not all forward-looking statements contain these identifying words You should not

place undue reliance on these forward-looking statements which apply only as of the date of this Form 10-K

The forward-looking statements included in this Form 10-K do not guarantee our future performance and actual

results could differ from those contemplated by these forward-looking statements Actual results or events could

differ materially from the plans intentions and expectations disclosed in the forward-looking statements that we

make We undertake no obligation to update any forward-looking statement to reflect events or circumstances

after the date on which the statement is made or to reflect the occurrence of unanticipated events Factors that

could cause or contribute to such differences include but are not limited to those discussed in cautionary

statements throughout this Form 10-K particularly those set forth in section Item IA Risk Factors

However new factors emerge from time to time and it is not possible for us to predict which factors will arise In

addition we cannot assess the impact of each factor on our business or the extent to which any factor or

combination of factors may cause actual results to differ materially from those contained in any forward-looking

statements We do not undertake to update or revise any forward-looking statements

PART

ITEM BUSINESS

The following discussion and analysis should be read in conjunction with our financial statements and

related notes included elsewhere in this Form 10-K This discussion and analysis contain forwa rd-looking

statements based upon current expectations that involve risks and uncertainties Our actual results and the

timing of events could differ materially from those anticipated in these forward-looking statements as result of

several facto rs including those set forth in the section entitled Item IA Risk Factors and elsewhere in this

Form 10-K

Business overview

We are specialist medical diagnostics company focused on the research development and manufacture of

in vitro diagnostic test devices for consumer and professional point-of-care use

We were incorporated in the State of Delaware on September 14 2001 and our shares of common stock in

the form of CHESS Depositary Interests CDIs have been quoted on the Australian Securities Exchange

ASX since December 13 2006 Our securities are not currently traded on any other public market Our

wholly owned subsidiary and primary operating vehicle Universal Biosensors Pty Ltd UBS was incorporated

as proprietary limited company in Australia on September 21 2001 UBS conducts our research development

and manufacturing activities in Melbourne Australia

Our principal place of business is Corporate Avenue Rowville Victoria 3178 Australia Our principal

telephone number in Australia is 61 9213 9000 Our agent for service in the United States is Corporation

Service Company of 2711 Centerville Road Suite 400 Wilmington County of New Castle Delaware United

States We also maintain web site at www.universalbiosensors.com The information contained in or that can

be accessed through our web site is not part of this Form 10-K

We have rights to an extensive patent portfolio with certain patents owned by UBS and number licensed

to UBS under license agreement between LifeScan Inc LifeScan and UBS License AgreementLifeScan has granted us worldwide royalty free exclusive license with right to sub-license certain

electrochemical cell technologies in all fields of use excluding the field of diabetes and blood glucose

management generally the rights to which are retained by LifeScan pursuant to the License Agreement Unless

otherwise noted references to LifeScan in this document are references collectively or individually to

LifeScan Inc and/or LifeScan Europe division of Cilag GmbH International both affiliates of Johnson and

Johnson

We are using our electrochemical cell technology platform to develop tests for number of different

markets Our current focus is as set out below

Blood glucose UBS provides services and acts as non-exclusive manufacturer of test strips for

LifeScans OneTouch VerioTM pursuant to Master Services and Supply Agreement with LifeScan

Master Services and Supply Agreement LifeScan continues its global rollout of the OneTouch Verio

product which is currently available in North America major European markets and Australia We also

undertake research and development work for LifeScan pursuant to development and research

agreement Development and Research Agreement

Coagulation testing market UBS is working with Siemens Healthcare Diagnostics Inc Siemens to

develop range of test strips and reader products for the point-of-care coagulation market pursuant to

collaboration agreement Collaboration Agreement

Other electrochemical-cell based tests we are working on proving the broader applicability of our

technology platform for other immunoassay and molecular diagnostic point-of-care tests We will seek to

enter into collaborative arrangements or strategic alliances with respect to any tests arising from this

work

Our Strategy

We are specialist medical diagnostics company focused on the research development and manufacture of

in vitro diagnostic test devices for consumer and professional point-of-care use Key aspects of our strategy

include

extending our electrochemical cell technology and proving the broader applicability of our technology

platform for markets with significant commercial potential

seeking to enter into collaborative arrangements or strategic alliances with other life sciences companies

or other industry participants to complete the development and commercialization of specific tests or in

specific fields

undertaking research and development work for our customers and partners

manufacturing test strips for our customers and partners as required

providing post market support services to our customers and partners

Plan of Operations for the Remainder of the Fiscal Year Ending December 2012

Our plan of operations over the remainder of the fiscal year ending December 2012 is to

continue to undertake research and development work for our customers and partners

manufacture test strips to satisfy our customers and partners demand requirements

provide the necessary post-market support for our customers and partners

prove the broader applicability of our technology platform for markets with significant commercial

potential focusing initially on immunoassay and molecular diagnostic point-of-care tests

seek to enter into collaborative arrangements or strategic alliances with other life sciences companies or

other industry participants to complete the development and commercialization of specific tests or in

specific fields

Financial information about segments

We operate in one segment Our principal activities are the research development and manufacture of in

vitro diagnostic test devices for consumer and professional point-of-care use Although our products are intended

for sale worldwide we operate predominantly in one geographical area that being Australia For details of our

revenues profit and loss and total assets for financial years ending December 31 2011 2010 2009 2008 and

2007 refer to Item Selected Financial Data

Description of our business

We are specialist medical diagnostics company focused on the research development and manufacture of

in vitro diagnostic test devices for consumer and professional point-of-care use

Industry background

We operate in the high growth point-of-care segment of the global in vitro diagnostics IVD industry

large proportion of biological testing has historically been performed by trained scientists at dedicated or

centralized testing sites including hospital laboratories and commercial pathology laboratories Significant

interest has developed in techniques and technologies that allow testing to be performed proximate in time and

location to the patient Point-of-care testing can be segmented into consumer testing or testing of patients by one

of variety of medical or laboratory professionals in locations such as clinics physicians office laboratories and

emergency departments While not all tests are suited to being performed at the point-of-care we believe our

electrochemical cell technology could be suitable platform for adapting number of relevant central laboratory

tests to point-of-care format

Point-of-care tests in development and partnering strategy

Our strategy is to apply the electrochemical cell technology to different fields and biomarkers and then to

enter into collaborative arrangements or strategic alliances with third parties to complete the development and

commercialization of the products for those fields We have developed blood glucose test with LifeScan and

are working with Siemens to develop range of test strip and reader products for the point-of-care coagulation

market We are also working to prove the broader applicability of our technology platform for markets with

significant commercial potential focusing initially on immunoassay and molecular diagnostic point-of-care tests

Facilities

Universal Biosensors Pty Ltd leases approximately 5000 square meters of office research and development

and manufacturing facilities at Corporate Avenue Rowville in Melbourne Australia We have had ISO 13485

certification continuously at that site since May 2007 The lease for Corporate Avenue expires on March 31

2014 with two options to renew the lease for successive five year periods

Raw materials

Raw materials essential to our business are purchased worldwide in the ordinary course of business from

numerous suppliers In general these materials are available from multiple sources Certain of our products in

development may be more reliant on sole sources of supply We will seek to enter into long term contracts of

supply with respect to these materials and will develop mitigation strategies which may include development

work to enable substitute materials to be used

Distribution

We do not currently intend to be responsible for the distribution and marketing of any product we develop Our

strategy is for our partners to be responsible for the commercialization and distribution of the applicable products

Regulatory clearances

In all major territories of the world regulatory clearances are required prior to marketing diagnostic tests

The regulatory clearance requirements vary from country to country and product to product however regulatory

clearances typically require satisfactory technical file which provides the regulatory bodies with details of

the design and previous testing of the product including safety and efficacy data as well as the details of the

conduct of trials which show the suitability for use of the product at the point-of-care Regulators also require

demonstration of continuing compliance with an appropriate quality management system There is no common

international regulatory body and we or our customer or partner would be required to submit for clearance to

sell in each of the major jurisdictions in which the relevant customers and partners seeks to market our products

For example for Europe Notified Body assesses the quality system and product technical file whereas in the

United States the Food and Drug Administration or FDA is the regulatory body responsible for the

examination of the design and performance of the device and for assessment of our quality system

In the case of point-of-care tests there are often additional requirements that manufacturer must meet such

as an examination of certain aspects affecting test suitability for non-professional users In Europe certain

codified standards describe the requirements of tests whilst in the United States tests to be used by

non-laboratory professionals must gain waiver status under the United States Clinical Laboratory Improvement

Amendments of 1988 Amongst other clearances we will also require clearance for export of medical devices

from the Therapeutics Goods Administration or TGA in Australia

Our customers and partners are generally responsible for obtaining and maintaining all applicable regulatory

approvals and determining the location and timing for submissions for regulatory clearance We my provide

supporting role in this process

The importance and duration of all our patents trademarks and licenses

We rely on combination of patent copyright trademark and trade secret laws as well as confidentiality

agreements to establish and protect our proprietary rights which in the aggregate we believe to be of material

importance to us in the operation of our business Our continued success depends to large extent on our ability to

protect and maintain our owned and licensed patents and patent applications copyright trademark and trade secrets

Our point-of-care tests in development draw upon an extensive portfolio of patents and patent applications

as well as know-how either owned by UBS or licensed to UBS by LifeScan We patent the technology

inventions and improvements that we consider important to the development of our business

We rely on the owned patent applications and the patents and patent applications licensed to us by LifeScan

in the manufacture of the point-of-care diagnostic tests being developed by us and to enable us to grant rights to

our customers and partners to commercialize products that we may develop

Our owned and licensed patents extend for varying periods according to the date of patent filing or grant and

the legal term of patents in the various countries where patent protection is obtained The actual protection

afforded by patent which can vary from country to country depends upon the type of patent the scope of its

coverage and the availability of legal remedies in the country Based on current product sales and our projects

the owned and licensed patents and patent applications that we consider most significant in relation to our

business together with the last of the patents to expire within the patent family are set forth in the table below

Expiration

Patent Year

Apparatus and Method for Elect rochemical Protease Sensor this patent family relates to sensor Refer Note

to detect cleavage of an electrochemical substrate for use in measuring blood or plasma

coagulation in assays such as prothrombin time and thrombin potential

Electrochemical On-Board Control Detection this patent family relates to an on-board control Refer Note

system of sensor wherein the control system can test/verify the viability of the sensor

Electrochemical Cell this patent family relates to method and an electrochemical biosensor for 2022

determining the concentration of an analyte in carrier

Electrochenical Method this patent family provides an improved method and biosensor for 2024

determination of the concentration of an analyte in carrier which provides improved accuracy

reliability and speed over prior techniques

Electrochemical Cell this patent family relates to an electrochemical cell for determining the 2016

concentration of an analyte in carrier

Electrochemical Method for Measuring Chemical Reaction Rates this patent family relates to the 2023

measurement of the progress of chemical reaction that generates an electroactive reaction

product that is subsequently detected at an electrode amperometrically or coulometrically

Electrochemical Cell Connector this patent family relates to connector to provide electrical 2026

connection between an electrochemical cell of strip type sensor and meter circuitry

Method and Apparatus for Rapid Electrochemical Analysis this patent application relates to an Refer Note

improved method and apparatus for electrochemical analysis

Methods and Apparatus for Analyzing Sample in the Presence of Interferents this patent Refer Note

application relates to methods and apparatus for determining analyte concentrations in rapid

and accurate manner

Systems and Methods for Discriminating Control Solution from Physiological Sample this Refer Note

patent application relates to systems and methods for discriminating between control solution

and blood sample

Systems and Methods of Discriminating Control Solution from Physiological Sample this patent Refer Note

application relates to systems and methods for discriminating between control solution and blood

sample based on summation of current values and comparing reference values to threshold values

The patent application is either pending allowed or published

We will continue to file and prosecute patent applications when and where appropriate to attempt to protect

our rights in our proprietary technologies

Pursuant to our License Agreement with LifeScan LifeScan is responsible for prosecution and maintenance

of the patents and patent applications licensed to us by them In the event that LifeScan elects not to proceed with

the prosecution of patent application licensed to us by them or discontinues the payment of fees we have the

right to assume and continue at our own expense the prosecution of any patent or patent applications

Our ability to build and maintain our proprietary position for our technology and products will depend on

our success in obtaining effective claims and those claims being enforced once granted and with respect to

intellectual property licensed from LifeScan LifeScans success in obtaining effective claims and those claims

being enforced once granted The patent positions of companies like ours are generally uncertain and involve

complex legal and factual questions for which important legal principles remain unresolved Some countries in

which we or our customers or partners may seek approval to sell point-of-care tests that we have been involved in

developing may fail to protect our owned and licensed intellectual property rights to the same extent as the

protection that may be afforded in the United States or Australia Some legal principles remain unresolved and

there has not been consistent policy regarding the breadth or interpretation of claims allowed in patents in the

United States the United Kingdom the European Union Australia or elsewhere In addition the specific content

of patents and patent applications that are necessary to support and interpret patent claims is highly uncertain due

to the complex nature of the relevant legal scientific and factual issues Changes in either patent laws or in

interpretations of patent laws in the United States the United Kingdom the European Union Australia or

elsewhere may diminish the value of our intellectual property or narrow the scope of our patent protection

Seasonality

We do not expect sales of the diagnostic tests we develop to be materially impacted by seasonality

The practices of the registrant and the industry respective industries relating to working capital items

We commenced manufacture in our facility in Corporate Avenue Rowville Melbourne in December 2009

We deal with our inventory and the supply of products in accordance with our contractual obligations to our

customers and partners

Dependence on single customer

As shown in the table below we currently receive significant portion of our revenue from LifeScan

Years Ended December 31

2011 2010 2009

Revenue from products 12063582 11760009 132733

Revenue from services 2632870 6420027 2850071

Research and development income 1337125

Milestone payment 17722641

Interest income 683323 1192889 809459

Fee income

Total income 15379775 19372925 22852029

Revenue from LifeS can as of total income 96% 94% 96%

Our dependence on LifeScan for significant proportion of our revenue is likely to continue until we start to

receive meaningful revenues from other collaborative arrangements or strategic alliances with third parties

Competitive conditions of our business

Our revenue is currently highly dependent on the success of the One-Touch Verio blood glucose product

we have developed with LifeScan One-Touch Verio was first launched in the Netherlands in January 2010 and

has subsequently been launched in Australia major European markets and North America LifeScan is

responsible for all sales and marketing decisions and any decision to introduce the product to new territories and

the timing of those decisions

The global diabetes market place is intensely competitive and dominated by multinationals such as

LifeScan Roche Abbott and Bayer Although One-Touch Verio has been well received in the jurisdictions in

which it has been launched we do not yet know if the product will be successful the extent to which LifeScan

will promote One-Touch Verio when compared to its existing diabetes products whether customers will prefer

it over competitive offerings nor the rate at which it might be adopted During 2012 we will continue to

manufacture blood glucose test strips for LifeScan as non-exclusive manufacturer under the Master Services

and Supply Agreement We anticipate that in the future LifeScan will manufacture all or large proportion of its

own requirements of any blood glucose test strip If we are unable to compete effectively with LifeScans own

manufacturing capacity we may not be able to win manufacturing commitment from LifeScan and therefore be

faced with surplus capacity in our manufacturing operations

Our research and development expenditure during the last three fiscal years were as follows

Years Ended December 31

2011 2010 2009

A$

Research and development expenses 9.812396 6482150 14898072

We expect that the range of test strip and reader products for the point-of-care coagulation market that we

are developing with Siemens will compete with existing point-of-care technologies from competitors such as

Roche Diagnostics Alere Inc and Abbott Point of Care The test will also have to compete with the central

laboratory which includes systems marketed by Siemens AG Diagnostica Stago Abbott Laboratories and

Beckman Coulter Inc All of these companies have well established brand recognition sales and marketing

forces and have significant resources available to support their product

Core to our business strategy is to extend our intellectual property platform to enable other tests currently

done in the central laboratory to be migrated to the point-of-care settings Our belief is that much testing done in

the central lab can more efficiently and profitably be performed at the point-of-care With the exception of blood

glucose testing most point-of-care testing is currently conducted in professional settings The health care

professional has choice and can request tests from central laboratory or services provider or choose to have

the test performed at the point-of-care Thus we face competition not just from other companies active in the

point-of-care space but also the providers of testing who operate in centralized settings

Employees

At March 2012 we had 111 full time employees in our Melbourne facility spanning production

engineering quality and regulatory research and development and administration

Financial information about geographic areas

We operate in one segment Our principal activities are research and development commercial manufacture

of approved medical or testing devices and the provision of services including contract research work We

operate predominantly in one geographical area being Australia

Available Information

We file annual and quarterly reports proxy statements and other information with the SEC Stockholders

may read and copy any reports statements or other information that we file at the SECs public reference rooms

in Washington D.C New York New York and Chicago Illinois Please call the SEC at 1-800-SEC-0330 for

further information about the public reference rooms Our public filings are also available from commercial

document retrieval services and at the Internet Web site maintained by us at http//universalbiosensors.com and

the SEC at http//www.sec.gov

We provide without charge to each person solicited by the Proxy Statement copy of our Annual Report on

Form 10-K including our financial statements but excluding the exhibits to Form 10-K other than Exhibit 13

The Annual Report includes list of the exhibits that were filed with the Form 10-K and we will furnish copy

of any such exhibit to any person who requests it upon the payment of our reasonable expenses in providing the

requested exhibit For further information please contact our Company Secretary Cameron Billingsley at

612 8115 9801 or write us at Corporate Avenue Rowville VIC 3178 You may also send an email to us at

companysecretary@universalbiosensors.com Our Annual Report on Form 10-K and our other filings with the

SEC including the exhibits are also available for free on our Internet site http.I/universalbiosensorscom and

the SECs Internet site http//www.sec.gov

ITEMS 1A RISK FACTORS

Investing in our shares or CDIs involves high degree of risk Before you invest in our shares or CDIs you

should understand the high degree of risk involved You should carefully consider the following risks and other

information in this Form 10-K including our financial statements and related notes appearing elsewhere in this

Form 10-K before you decide to invest in our shares or CDIs If any of the events described below actually

occurs our business financial condition and operating results could be harmed In such an event the market

price of our CDIs would likely decline andyou could lose part or all of your investment

Our products may not be successful in the marketplace

Success of products that we are involved in developing is ultimately dependent on the level of market

acceptance and sales of those products Market acceptance will depend on amongst other things the ability to

provide and maintain evidence of safety efficacy and cost effectiveness of the products the advantages and

profile over competing products the level of support from clinicians the relative convenience and ease of use

cost-effectiveness compared to other products the availability of reimbursement from national health authorities

the timing of market introduction and the success of marketing and sales efforts by our customers and partners

Additionally it is difficult to determine the market opportunity for new technologies and our estimates may not

accurately reflect the actual demand in the target markets

Our commercial opportunity will be reduced or eliminated if the size of the market opportunity is less than

we expect or if our competitors develop and commercialize products that are safer more effective more

convenient less expensive or reach markets sooner or are marketed better than products that we are involved in

developing

The blood glucose test strips for the One Touch Verio product was first launched in January 2010 While

initial market acceptance for One Touch Verio has been positive there is no guarantee that the product will

receive positive acceptance in all countries in which the product will be launched including in the key

jurisdiction of the United States or that market acceptance will be maintained or will secure adequate market

share

Further we cannot be sure that any future products we are involved in developing with our customers and

partners such as the test strip and reader products for the point-of-care coagulation market that we are

developing with Siemens will be successful in the marketplace or will secure adequate market share

Our ability to be or maintain profitability in the future will be adversely affected if any of the products that

we are involved in developing fail to achieve or maintain market acceptance or compete effectively in the market

place It would reduce or eliminate our revenues from product sales and manufacturing and have material

adverse effect on our business and financial position

We are currently dependent on LifeScan for our income

We are at an early stage of our development as specialist medical devices company The vast majority of

our income is currently derived from LifeScan and our business is therefore dependent on the level of services

we provide to LifeScan the number of test strips we manufacture for LifeScan and the sales of the blood glucose

test strips for the One Touch Verio product Any changes in LifeScans requirements and the level of test strip

sales will directly affect our business

To date we have funded our operations primarily through the issue of shares from payments received from

LifeScan including revenue from products and services and research and development income and from

Australian state and federal grants received by UBS We do not currently have and may never have any

products or services that generate substantial revenues

We act as non-exclusive manufacturer of the blood glucose test strips we developed with LifeScan In the

future we expect that LifeScan will manufacture all or large proportion of its own requirements If our

manufacturing capacity is not fully utilized or not utilized at all we will be faced with surplus capacity in our

manufacturing operations and our revenues will decline If the Master Services and Supply Agreement with

LifeScan was terminated as result of either party defaulting on its material obligations becoming insolvent or

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as result of other factors detailed in the Master Services and Supply Agreement we would cease to have the

potential to receive service fee revenues from the sale of blood glucose strips In addition LifeScan has the

ability to terminate the obligation to pay service fees to us by paying us lump sum amount but may only do so

once it has paid us certain level of service fees we do not expect this level of service fees will be achieved until

worldwide sales volumes have increased significantly or as result of other factors detailed in the Master

Services and Supply Agreement The service fee revenue is an ongoing amount LifeScan is obligated to pay to us

based on the number of strips sold by LifeScan regardless of who manufactures the strips If LifeScan was able to

and did terminate the service fees although we would receive large lump sum payment we would cease to

receive ongoing service fee revenue and our ongoing future business would be adversely affected

Our customers and partners may choose to utilize less of our research and development services If the

development and research work we undertake was materially reduced or ceased we would lose an ongoing

source of income which would have material adverse effect on our business and financial position

Our business strategy and revenue relies on our ability to enter collaborative arrangements with other

companies and there is risk that we will not be able to enter into collaborative arrangements or strategic

alliances with respect to our products

Our business strategy involves proving the broader applicability of our technology platform for number of

different products/technologies and then entering into collaborative arrangements licensing agreements or strategic

alliances with other life sciences companies or other industry participants for these products/ technologies We have

not established any internal product sales and marketing capacity and to achieve commercial success we must enter

into and maintain successful arrangements with others to sell market and distribute products that we are involved in

developing In seeking collaborative arrangement we need to compete against hundreds of technology companies

for the attention of the limited pool of global multinationals We may not be able to enter into such collaborative

arrangements or strategic alliances in timely fashion and on acceptable terms if at all An inability to enter such

arrangement would be detrimental to our strategy business and financial position

Our ability to enter into collaborative arrangements or strategic alliances will suffer if the performances of

the technologies developed by us are not perceived as being comparable or superior to established laboratory

methods or other products Other competitive factors may also act as obstacles in our ability to enter into

partnership arrangements for certain opportunities

If we are unable to enter collaborative arrangements with respect to certain of our products/technologies we

may have to delay reduce the scope of or eliminate some or all of our development programs or liquidate some

or all of our assets or seek to raise additional capital As result we may not be able to pursue what we consider

to be worthwhile commercial opportunities and significant monies and management time invested may be

rendered unproductive and worthless An inability to enter collaborative arrangement or partnership would thus

have material adverse effect on our business and financial position

Entering collaborative arrangements with respect to our products will expose us to risks and uncertainties

related to those collaborations and alliances

To the extent we are able to enter into collaborative arrangements or strategic alliances with respect to our

products we will be exposed to risks and uncertainties related to those collaborations and alliances The

customer or partner will generally makes the key decisions on product choice regulatory approvals product

launch product manufacture and marketing and promotion Decisions made by our partner with respect to the

commercialization of the products we develop with them will significantly affect the extent and timing of

revenues to us For example our partner may choose not to launch new products we develop may choose to

launch the products in limited number of jurisdictions may delay the launch of products may undertake only

limited sales and marketing efforts to commercialize the products all of which would have material adverse

effect on our business and financial position Collaborative arrangements licensing agreements or strategic

alliances will subject us to number of risks including the risk that

we do not control the amount and timing of resources that our strategic partners may devote to our products

we do not control the decision to pursue product the timing of product launches and extent of marketing

and sales activities

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our strategic partners may experience financial difficulties

we may be required to relinquish important rights such as marketing and distribution rights

business combinations or significant changes in partners business strategy may also adversely affect

collaborators willingness or ability to complete its obligations under any arrangement

collaborator could independently move forward with competing product developed either

independently or in collaboration with others including our competitors and

collaborative arrangements are often terminated or allowed to expire which would delay the development

and may increase the cost of developing our products

Allegedly defective design or the manufacture of allegedly defective test strips could potentially expose us to

substantial costs write-offs and reputational damage

Allegedly defective designs or manufacture of allegedly defective products exposes us to the risk of product

liability claims and product recalls resulting in substantial costs write-offs and potential delays in our shipment of

product to customers decreased demand for products loss of revenue and cash flow reputational damage costs of

related litigation increases in our insurance premiums and increased scrutiny by regulatory agencies claims by our

customers and may trigger the dissolution of partnerships or collaborative relationships While we will seek to

mitigate our loss by obtaining appropriate insurances if we are unable to maintain our insurance at an acceptable

cost or on acceptable terms with adequate coverage or otherwise protect against potential product liability claims

we will be exposed to significant liabilities This may harm our business and compromise the performance of our

obligations to our customers and would have material adverse effect on our business and financial results and may

result in claims by our customers or partners and may trigger the dissolution of partnerships or collaborative

relationships Any claim for damages by our customers or other claim against us could be substantial

There are many elements to manufacturing products that can cause variability beyond acceptable limits We

may be required to discard defective products after we have incurred significant material and labor costs

resulting in manufacturing delays and delayed shipment to customers Further if our suppliers are unable to

provide materials in conformance with specifications we may be required to discard materials which may also

cause delays in the manufacture and shipment of products

Reduced margins would have material adverse effect on our business and financial position

Our margins may be reduced and costs increased which would have material adverse effect on our

business and financial position The two primary factors that pose this risk include increased manufacturing costs

or currency fluctuations

Increases in our costs to manufacturing products or conducting development work may decrease our

margins or cause us to suffer loss on the manufacture products Additionally we may suffer decreased margins

due to the global reach of our business exposing us to market risk from changes in foreign currency exchange

rates While the majority of our cash reserves and expenses are in Australian dollars we continue to deal in other

currencies particularly in the United States and Europe which may increase costs and decrease revenues

incurred in foreign currencies Additionally we use from time to time financial instruments primarily foreign

currency forward contracts to hedge certain forecasted foreign currency commitments arising from trade

accounts receivables trade accounts payable and fixed purchase obligations These hedging activities are largely

dependent upon the accuracy of our forecasts and as such our foreign currency forward contracts may not cover

our full exposure to exchange rate fluctuations Although we believe our foreign exchange policies are

reasonable and prudent under the circumstances we may experience losses from un-hedged currency

fluctuations which could be significant If our costs increase or our margins decrease it would have an adverse

effect on our business and financial position

New product design and development and clinical testing is costly labor intensive and the outcomes uncertain

The design and development of different tests on our platform takes number of years to complete is costly

and the outcomes are uncertain Although development risk generally reduces the further test is developed the

tests we develop have significant degree of technical risk and irrespective of the stage of development design

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and development work and product validation the development of the test may be unsuccessful or not warrant

product commercialization If development activities are unsuccessful we may need to delay reduce the scope of

or eliminate some or all of our development programs and significant monies and management time invested

may be rendered unproductive and worthless

Our agreements with our customers generally contain milestone based payments many of which are payable

upon the achievement of technical development milestones In the event we are not successful in achieving the

development milestone we will not receive the milestone payments which would have material adverse effect

on our revenue and financial position Furthermore if we are unable to develop product for customer it may

eliminate an important revenue stream for us which may result in us not being profitable or trigger dissolution of

partnerships or collaborative relationships

Diagnostic devices must be tested for safety and performance in laboratory and clinical trials before

regulatory clearance for marketing is achieved Such studies are costly time consuming and unpredictable

Clinical trials may not be successful and marketing authorization may not be granted which may result in us not

being profitable or trigger dissolution of partnerships or collaborative relationships The outcome of early

clinical trials may not be predictive of the success of later clinical trials Failed clinical trials may result in

considerable investments of time and money being rendered unproductive and worthless

Additionally unanticipated trial costs or delays could cause substantial additional expenditure that is not

reimbursed by partner cause us to miss milestones which trigger financial payment or cause us or partner to

delay or modify our plans significantly This would harm our business financial condition and results of operations

If we cannot maintain our intellectual property rights our ability to make or develop point-of-care tests would

be restricted or eliminated and the value of our technology and diagnostic tests may be adversely affected

Our ability to obtain proprietary rights maintain trade secret protection and operate without infringing the

proprietary rights of third parties is an integral part of our business

number of companies universities and research institutions have or may be granted patents that cover

technologies that we need to complete development of particular product We may choose or be required to

seek licenses under third party patents which would be costly may not be available on commercially acceptable

terms or at all Further we may be unaware of other third party patents or proprietary rights that are infringed by

our point-of-care tests

Our diagnostic tests are based predominantly on intellectual property rights that have been licensed to us

from LifeScan If we were to breach the License Agreement and LifeScan were to validly terminate the

agreement in response it would seriously restrict or eliminate our ability to develop and commercialize our

existing and future tests which would have material adverse effect on us as it would eliminate our existing

commercialization opportunities

LifeScan has considerable degree of control in the manner that the intellectual property licensed to us is

maintained and protected and as result we have reduced control with respect to the maintenance and protection

of large portion of our licensed patent portfolio LifeScan is responsible for the prosecution and maintenance of

the intellectual property it licenses to us and we are largely dependent on them to defend proceedings or

prosecute infringers Our business would be harmed if the licensed patents were infringed or misappropriated

Prosecuting third parties and defending ourselves against third-party claims would be costly time consuming and

divert managements attention from our business potentially leading to delays in our development or

commercialization efforts Additionally if third parties made successful claims we may be liable for substantial

damages or license fees be required to stop marketing the infringing product or take other actions that are

adverse to our business

Risks associated with regulatory clearance and changes to regulation

The products we are involved in developing are medical devices and therefore subject to extensive

regulation in all major markets The process of obtaining regulatory clearance is costly and time consuming and

there can be no assurance that the required regulatory clearances will be obtained Products cannot be

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commercially sold without regulatory clearance Our customers and partners may be unable to obtain the

necessary clearances to sell or if the clearances are delayed revoked or subject to unacceptable conditions the

product may not be able to be commercialized which would have material adverse effect on us

If we were required and able to change suppliers and third party contract manufacturers applicable

regulatory bodies may require new testing and compliance inspections and require that we demonstrate structural

and functional comparability between the same products manufactured by different organizations resulting in

additional costs and potential delays which could be detrimental to our business

Furthermore regulation is ongoing and manufacturers and marketers of products are subject to continuous

review and periodic inspections Potentially costly responses may be required to be given by us and our

customers including product modification or post-marketing clinical trials as condition of approval to further

substantiate safety and efficacy or investigate issues of interest If we or our customers fail to comply with

applicable regulatory requirements it may result in fines delays suspensions of clearances seizures recalls of

products operating restrictions or criminal prosecutions and could have material adverse effect on our

operations Additionally changes in existing regulations or the adoption of new regulations could make

regulatory compliance by us more difficult in future and could hamper our ability to produce our products when

we require

Risks associated with suppliers

Similar to most major manufacturers in our industry we are dependent upon our suppliers for certain raw

materials and components We have preferred suppliers making us vulnerable to supply disruption which could

harm our business and delay manufacturing operations We seek to enter into long term contractual arrangements

with certain of our suppliers however we may not always be able to do so on acceptable terms We may not be

able to guarantee the supply of certain of our materials which may in turn affect our ability to supply product to

our customers We may have difficulty locating alternative suppliers in timely manner or on commercially

acceptable terms and switching components may require product redesign and further regulatory clearance

which could significantly delay production Likewise our customers and partners are subject to supply risks

which may delay their ability to supply customers with product which would impact our revenue and have

consequential adverse effect on our business and results of operations

To the extent we agree to be responsible for manufacturing meters for any of our customers and partners we

anticipate that we will outsource the manufacture of these meters There is no guarantee that we will be able to

enter into any such arrangement on acceptable terms if at all and as result there is risk of lengthy and costly

delays of bringing our products to market Further if our contract manufacturers fail to achieve and maintain

required production yields or manufacturing standards it could result in product withdrawals delays recalls

product liability claims and other problems that could seriously harm our business Any meter shortages or

manufacturing delays could result in delays or reduction in our revenues with consequential adverse effect on

our business and results of operations

The success of our business is heavily dependent upon market factors such as growth of the point-of-care

testing market and our ability to compete effectively within the highly competitive in vitro diagnostics

market

Our business success relies on the growth of both the existing and emerging point-of-care testing market

We cannot be sure that this market will grow as we anticipate Such growth will require continued support and

demand from payers patients and health care professionals and the endorsement by professional bodies that

influence the practice of medicine Research and clinical data may not sufficiently support point-of-care testing

nor may the health economic benefits sufficiently support point-of-care testing as an alternative to current

practice Even if the data is compelling significant resources may be required to educate users and change in

practice may be slower and more costly than we anticipate If point-of-care testing fails to be adopted at the rate

we expect the sector may remain unattractive to the size of partner we seek to attract and as consequence we

may need to change our business model This may require us to incur more cost and/or our anticipated growth

will be adversely affected and our results will suffer

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We may face intense competition in development marketing and selling point-of-care tests

The market for in vitro diagnostics is intensely competitive price sensitive and subject to rapid change We

and our customers and partners may be unable to accurately anticipate changes in the markets and the direction

of technological innovation and the demands of end users competitors may develop improved technologies and

the market place may conclude that our products are obsolete Our larger competitors enjoy several competitive

advantages including significantly greater financial resources greater brand recognition greater expertise in

conducting clinical trials obtaining regulatory approvals and managing manufacturing operations and greater

experience in product sales and marketing Early-stage companies may also prove to be significant competitors

Competition will be faced from existing products as well as products in development Point-of-care tests are

likely to experience significant and continuing competition from traditional pathology laboratory based testing as

well as other point-of-care tests Our and our customers and partners commercial opportunity will be reduced or

eliminated if competitors develop and commercialize safer more effective more convenient or cheaper

products or reach the market sooner than we do Any such developments adversely affecting the market for

products developed by us may force us and our partners to reduce production or discontinue manufacturing

which would cause our operating results to suffer There can be no assurances given with respect to our or any

partners ability to compete effectively in the competitive markets in which we operate

We face risks manufacturing product for partners

There are technical challenges establishing and maintaining commercial manufacturing for products

including maintaining the consistency of our incoming raw materials equipment design and automation material

procurement production yields and quality control and assurance We may fail to achieve and maintain required

production yields or manufacturing standards which could result in patient injury or death product recalls or

withdrawals product shortages delays or failures in product testing or delivery breach of our agreements with

any partner and other problems that could seriously harm our business

Adverse economic conditions may harm our business

Market and economic conditions have been challenging worldwide Continuing concerns have led to increased

market volatility and diminished expectations for world economies These factors may include fluctuations in foreign

exchange rates inflation interest rates rate of economic growth taxation laws consumer spending unemployment

rates government fiscal monetary and regulatory policies and consumer and business sentiment Any of these factors

have the potential to cause costs to increase or revenues to decline Continued turbulence in the US and international

markets and economies may adversely affect our ability to enter into collaborative arrangements the behavior and

financial condition of our current and any future customers and partners and the spending patterns of users of the

products we are developing This may adversely impact demand for our services and for products developed by us In

addition economic conditions could also impact our suppliers which may impact on their ability to provide us with

materials and components which in turn may negatively impact our business

We may not be able to raise capital or secure credit if and when required

We may not be able to raise capital or secure credit if and when required If we are unable to raise capital or

secure credit when required we may have to delay reduce the scope of or eliminate some or all of our

development programs or commercialization efforts or liquidate some or all of our assets

The loss of key employee or the inability to recruit and retain high caliber staff to manage future

anticipated growth could have material adverse effect on our business

As with most growth companies our future success is substantially dependent on our key personnel Certain

key personnel would be difficult to replace and the loss of any such key personnel may adversely impact the

achievement of our objectives Our ability to operate successfully and manage the business depends significantly

on attracting and retaining additional highly qualified personnel The loss of any key personnel may be disruptive

or have material adverse effect on the future of our business The competition for qualified employees in

scientific research and medical diagnostic industries is particularly intense and there are limited number of

persons with the necessary skills and experience

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Our primary operations are conducted at single location Any disruption at our facility could adversely

affect our operations and increase our expenses

Our primary operations are conducted at our Corporate Avenue facility in Melbourne Australia We take

precautions to safeguard our facility including security health and safety protocols and maintain applicable

insurance However we may be impacted by industrial action or operating equipment and facilities may not

operate as intended or be available as result of unanticipated failures or other events outside of our control such

as natural disaster fire flood or earthquake or catastrophic breakdowns or deliberate acts of destruction The

occurrence of any of these event may restrict our ability to supply product could cause substantial delays in our

operations damage or destroy our manufacturing equipment or inventory and cause us to incur additional

expenses The insurance we maintain against fires floods earthquakes and other natural disasters may not be

adequate to cover our losses in any particular case

Investors may be subject to Australian and/or US taxation

The receipt of dividends by Australian tax resident security holders and any subsequent disposal of our

securities by Australian tax resident may have both United States and Australian tax consequences depending

upon their individual circumstances This may result in security holder being subject to tax in both jurisdictions

and tax credit may or may not be available in one jurisdiction to offset the tax paid in the other jurisdiction

depending upon the security holders individual circumstances

The price of our shares is highly volatile and could decline significantly

Our shares of common stock in the form of CDIs were quoted on the ASX and began trading on

December 13 2006 The price of our shares is highly volatile and could decline significantly The market price of

our shares historically has been and we expect will continue to be subject to significant fluctuations over short

periods of time These fluctuations may be due to factors specific to us to changes in analysts recommendations

and earnings estimates or to factors affecting the life sciences industry or the securities markets in general For

example from the initial quotation of our shares in the form of CDIs on the Australian Securities Exchange on

December 13 2006 until March 2012 the closing price per share of our shares ranged from low of A$0.41

during February 2009 to high of A$2.02 during the first quarter of the 2010 fiscal yearand was A$0.80 on

March 2012 We may experience material decline in the market price of our CDIs regardless of our

operating performance and therefore holder of our shares may not be able to sell those shares at or above the

price paid by such holder for such shares Sales by our larger shareholders may create volatility or impact how

the value of our shares is perceived

Class action litigation has been brought in the past against companies which have experienced volatility in

the market price of their securities We may become involved in this type of litigation in the future Litigation of

this type is often extremely expensive and diverts managements attention and our resources

Our securities are not currently traded on any United States public markets and there are currently

restrictions on the ability of United States persons to acquire our securities on the ASX

There is no public market for our shares in the United States or in any other jurisdiction other than Australia

We have not determined whether we will seek the quotation of our shares on any United States public trading

market Even if our shares are in the future listed on United States public market the liquidity of our shares

may not improve and the United States market price may not accurately reflect the price or prices at which

purchasers or sellers would be willing to purchase or sell our common stock

In addition substantial number of our shares are restricted securities and resale of these shares to

U.S Persons as defined in Regulation of the Securities Act of 1933 may only occur in limited number of

specified circumstances

We may be involved in litigatkrn

There has been substantial litigation and other proceedings in the medical diagnostic industries Defending

against litigation and other third party claims would be costly and time consuming and would divert

16

managements attention from our business which could lead to delays in our development or commercialization

efforts If third parties are successful in their claims we might have to pay substantial damages or take other

actions that are adverse to our business

Changes in laws may adversely affect our business

Our business and the business of our customers and partners are subject to the laws and regulations in

number of jurisdictions Unforeseen changes in laws and government policy both in Australia the EU the US

and elsewhere could materially impact our operations assets contracts and profitability

We are exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley

Act

Changing laws regulations and standards relating to corporate governance and public disclosure including

the Sarbanes-Oxley Act of 2002 Sarbanes-Oxley Act and related regulations implemented by the SEC have

substantially increased legal and financial compliance costs We expect that our ongoing compliance with

applicable laws and regulations including the Securities Exchange Act of 1934 as amended Exchange Actand the Sarbanes-Oxley Act will involve significant and potentially increasing costs In particular we must

annually evaluate our internal controls systems to allow management to report on our internal controls

Additionally as an accelerated filer with the SEC our independent auditors must attest to our internal controls

We must perform the system and process evaluation and testing and any necessary remediation required to

comply with the management certification and when applicable auditor attestation requirements of Section 404

of the Sarbanes-Oxley Act If we are not able to continue to satisfy the requirements of Section 404 adequately

we may be subject to sanctions or investigation by regulatory authorities including the SEC Any action of this

type could adversely affect our financial results investors confidence in our company and our ability to access

capital markets and could cause our stock price to decline

significant amount of our shares are controlled by individuals or voting blocks and the interests of such

individuals or voting blocks could conflict with those of the other stockholders

Single stockholders with significant holdings or relatively small groups of stockholders have the power to

influence matters requiring the approval of stockholders Approximately 11.7% of our outstanding shares of

common stock are owned by The Principals Cornerstone Fund Pty Ltd an Australian company which holds

shares on trust for our directors Messrs Denver Hanley and Dr Adam These directors also hold shares directly

and through other vehicles In addition company called PFM Cornerstone Limited an Australian company of

which Messrs Denver Hanley and Dr Adam are directors holds approximately 7.6% of our shares Mr Andrew

Jane is one of our directors and director of CM Capital Investments Pty Ltd which holds approximately 11.2%

of our shares As directors these individuals have the power to influence significantly all matters requiring the

approval of our stockholders including the election of directors and the approval of other significant resolutions

and their interests may conflict with those of the other stockholders In addition control of significant amount

of our common stock by insiders could adversely affect the market price of shares Based on the latest

Amendment to Schedule 13G filed on January 25 2012 Johnson and Johnson Development Corporation

venture capital wholly owned subsidiary of Johnson Johnson beneficially held 14915400 shares in the

Company as at December 31 2011 which represents approximately 9.4% of the Companys shares For details of

our substantial stockholders and the interests of our directors refer to Item 12 Security Ownership of Certain

beneficial Owners and Management and Related Stockholder Matters

We have never paid dividend and we do not intend to pay dividends in the foreseeable future which means

that holders of shares of common stock and CDIs may not receive any return on their investment from

dividends

To date we have not declared or paid any cash dividends on our shares or CDIs and currently intend to

retain any future earnings if any for funding growth We do not anticipate paying any dividends in the

foreseeable future

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Our holders of CDIs are not stockholders and do not have stockholder rights

The main difference between holding CDIs and holding our underlying shares is that CDI holder has

beneficial ownership of the equivalent number of shares instead of legal title CDIs are exchangeable at the

option of the holder into shares of our common stock at ratio of 11 Legal title is held by CHESS Depositary

Nominees Pty Ltd CDN and the shares are registered in the name of CDN and held by CDN on behalf of and

for the benefit of CDI Holders CDN is wholly owned subsidiary of ASX CDI holders will be entitled to all the

economic benefits of the shares underlying their CDIs such as dividends if any bonus issues or rights issues

CDN as stockholder of record will receive notice of stockholder meetings and be entitled to attend and vote at

stockholder meetings CDI holders will likewise be sent notices of stockholder meetings and are entitled to attend

stockholder meetings but are not permitted to vote other than by giving directions on how to vote to CDN or as

proxy holder for CDN

Our success is dependent on the accuracy reliability and proper use of sophisticated information processing

systems and management information technology and the interruption in these systems could have

material adverse effect on our business financial condition and results of operations

Our success is dependent on the accuracy reliability and proper use of sophisticated information processing

systems and management information technology Our information technology systems are designed and selected

in order to facilitate the entering of order entry customer billing to maintain customer records to provide

product traceability to accurately track purchases to manage accounting finance administration and

manufacturing generate reports and provide customer service and technical support Any interruption in these

systems could have material adverse effect on our business financial condition and results of operations

Provisions in our charter documents and under Delaware law could make the possibility of our acquisition

which may be beneficialfor our stockholders more difficult and may prevent attempts by our stockholders

to replace or remove current management

Provisions in our certificate of incorporation and our bylaws may delay or prevent an acquisition of us or

change in our management and frustrate or prevent attempts by our stockholders to replace or remove our

current management by making it more difficult to remove our current directors Such provisions include

the division of our Board into classes whose terms expire at staggered intervals over three year period

and advance notice requirements for nominations to our Board and proposing matters that can be acted

upon at shareholder meetings

the requirement that actions by our stockholders by written consent be unanimous

the ability of our Board to issue preferred stock

Limitation on Independent Registered Public Accounting Firms Liability

The Australian accounting fum we utilize for audit reports on our financial statements is subject to limitations

on liabilitywith respect to claims arising out of their audit reports in accordance with professional standards

legislation This legislation may limit theliability of our accountants for damages with respect to certain civil

claims arising directly or vicariously from anything done or omitted in the performance of their professional

services to us including to the lesser of in the case of audit services ten times the reasonable charge for the service

provided and maximum liability for audit work of A$75 million or in relation to matters occurring prior to

October 2007 A$20 million The limit does not apply to claims for breach of trust fraud or dishonesty

These limitations of liability may limit recovery upon the enforcement in Australian courts of any judgment

under US or other foreign laws rendered against our Australian accountants based on or related to their audit report

on our financial statements Substantially all of our accountants assets are located in Australia However the

professional standards legislation has not been subject to judicial consideration and therefore how the limitation will

be applied by the courts and the effect of the limitation on the enforcement of foreign judgments are untested

ITEM lB UNRESOLVED STAFF COMMENTS

None

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ITEM PROPERTIES

Universal Biosensors Pty Ltd leases approximately 5000 square meters of office research and development

and manufacturing facilities at Corporate Avenue Rowville in Melbourne Australia The lease for the

premises at Corporate Avenue Rowville expires on March 31 2014 with two options to renew the lease for

successive five year periods

We manufacture our test strips using custom manufacturing equipment

Depending on the number of strips required to be manufactured it may become necessary in the future for

us to acquire additional large scale equipment to satisfy manufacturing demand If our existing facilities and

equipment are fully utilized for the manufacture of test strips for one of our customers or partners we will need

to secure additional or alternative facilities and establish additional large scale equipment sufficient to future

manufacturing requirements

ITEM LEGAL PROCEEDINGS

There are no material legal or arbitration proceedings pending against us or Universal Biosensors Pty Ltd

ITEM MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS

AND ISSUER PURCHASES OF EQUITY SECURITIES

Market information

Our shares of common stock are not currently traded on any established United States public trading market

We have not determined whether we will seek the quotation of our shares of common stock on any United States

public trading market We cannot assure you that we will seek to be quoted on any United States public trading

market or that we would meet any applicable listing requirements

Our shares of common stock are traded on the ASX in the form of CHESS Depositary Interests or CDIs

under the ASX trading code UBI The Clearing House Electronic Subregister System or CHESS is an

electronic system which manages the settlement of transactions executed on the ASX and facilitates the paperless

transfer of legal title to ASX quoted securities CHESS cannot be used directly for the transfer of securities of

companies such as us that are domiciled in countries whose laws do not recognize uncertificated holdings or

electronic transfer of legal title CDIs are used as method of holding and transferring the legal title of these

securities on the ASX which are not able to be electronically traded in CHESS CDIs are exchangeable at the

option of the holder into shares of our common stock at ratio of 11 The main difference between holding

CDIs and holding the underlying securities in this case our shares is that holder of CDIs has beneficial

ownership of the equivalent number of our shares instead of legal title Legal title is held by CHESS Depositary

Nominees Pty Ltd or CDN and the shares are registered in the name of CDN and held by CDN on behalf of and

for the benefit of the holders of CDIs CDN is wholly owned subsidiary of ASX

Holders of CDIs who do not wish to have their trades settled in CDIs on the ASX may request that their

CDIs be converted into shares in which case legal title to the shares of common stock are transferred to the

holder of the CDIs Likewise stockholders who wish to be able to trade on the ASX can do so by requesting that

their shares be converted into CDIs and by lodging their applicable share certificate with our share registrar and

signing share transfer form with respect to the relevant shares Our share registrar will then transfer the shares

from the stockholder to CDN and establish CDI holding in the name of the stockholder now CDI holder

High and low sale prices of our CDIs on the ASX

The sale prices of our shares traded in the form of CDIs are quoted on the ASX in Australian dollars Our

CDIs were first quoted on the ASX on December 13 2006 Twenty minute delayed trading prices of our CDIs

are available through the ASX at www.asx.com.au

19

The following tables sets forth for the periods indicated the highest and lowest market prices in Australian

dollars for our CDIs reported on the ASX

HighA$ LowA$

Fiscal Year 2011

First Quarter A$1.59 A$1.23

Second Quarter A$ 1.40 A$0.90

Third Quarter A$1.19 A$.083

Fourth Quarter A$0.94 A$0.72

Fiscal Year 2010

First Quarter A$2.02 A$1.60

Second Quarter A$ 1.75 A$1.30

Third Quarter A$1.68 A$1.40

Fourth Quarter AS 1.65 A$1.35

Security details

As of March 2012 there were 159146213 shares of our common stock issued and outstanding and

11258290 employee options that are exercisable for an equivalent number of shares of common stock

7854111 of which were exercisable or exercisable within 60 days thereafter All of our issued and outstanding

shares of common stock are fully paid

Under applicable U.S securities laws all of the shares of our common stock are restricted securities as

that term is defined in Rule 144 under the Securities Act Restricted securities may be resold to U.S persons as

defined in Regulation only if registered or if they qualify for an exemption from registration under the

Securities Act each as described in more detail below We have not agreed to register any of our common stock

for resale by security holders

Rule 144b

Because there is no public trading market for the shares in the United States no sales in the United States

under Rule 144 other than Rule 144bli are likely to occur Under Rule 144bli person who is not

deemed to have been an affiliate of ours at any time during the 90 days preceding sale and who has

beneficially owned the shares proposed to be sold for between six months and one year may sell so long as the

public information requirements of Rule 144 are satisfied and after one year such person is entitled to sell the

shares without having to comply with the manner of sale public information or provisions of Rule 144 person

who is deemed an affiliate during the 90 days preceding the sale who has beneficially owned the shares proposed

to be sold for at least six months may sell so long as the conditions of Rule 144 are met including the manner of

sale public information volume limitation and notice filing provisions of Rule 144

Holders

Currently CDN holds the majority of our shares on behalf of and for the benefit of the holders of CDIs The

balance of the shares are held by certain of our employees Set out below is the aggregate number of our

registered holders of CDIs and shares at the specific date below

Number of holders that

Total Number of are United States

Date Registered Holders Residents

At March 2012 1507

Dividends

To date we have not declared or paid any cash dividends on our shares or CDIs and currently intend to

retain any future earnings if any for funding growth We do not anticipate paying any dividends in the

foreseeable future

20

Securities authorized for issuance under equity compensation plans

Set out below are details of our Employee Option Plan as at December 31 2011

Equity Compensation Plan Information

Number of securities to be

issued upon exercise of Weighted average exercise Number of Securities

outstanding options price of outstanding remaining for future

Plan Category warrants and rights options warrants and rights issuance

A$

Equity compensation plans

approved by security

holders 11417536 1.02

Equity compensation plans

not approved by security

holders

Total 11417536 1.02

The number of employee options able to be granted is limited to the amount permitted to be granted at law

the ASX Listing Rules and by the limits on our authorized share capital in our certificate of incorporation

The Listing Rules of ASX generally prohibit companies whose securities are quoted on the ASX from

issuing securities exceeding 15% of issued share capital in any 12 month period without stockholder

approval

21

Recent Sales of Unregistered Securities Use of Proceeds from Registered Securities

Exercise of Employee Stock Options

The table below sets forth the number of employee stock options exercised and the number of shares of

common stock issued in the period from January 2009 to December 31 2011 We issued these shares in

reliance upon exemptions from registration under Regulation under the Securities Act of 1933 as amended

Number of Options

Exercised and

Corresponding Number

Period Ending of Shares Issued Option Exercise Price Proceeds Received

A$2009

August 2009 36248 A$0.31 11221

September 2009 25374 A$0.31 7853

November 2009 13332 A$0.89 11865

November 2009 25373 A$0.28 7059

November 2009 8000 A$0.70 5600

November 2009 30000 A$1.18 35400

138327 78998

2010

February 2010 23333 A$0.89 20766

February 2010 20000 A$0.94 18800

February 2010 4000 A$0.50 2000

February 2010 18124 US$0.26 5104

February 2010 13332 A$1.18 15732

February 2010 18124 US$0.22 4489

February 2010 33333 Nil

March 2010 6666 A$0.89 5933

March 2010 6666 A$0.70 4666

March 2010 2000 A$094 1880

May2010 12500 Nil

June 2010 6667 A$0.94 6267

June 2010 20000 US$0.22 4040

August 2010 25374 US$0.26 8381

August 2010 20000 A$1.18 23600

August 2010 13332 A$0.89 11865

August 2010 6667 A$0.94 6267

September 2010 13333 A$0.94 12533

September 2010 8000 A$0.70 5600

September 2010 16666 A$1.20 19999

September 2010 3333 A$0.94 3133

October 2010 960560 US$0.26 256018

October 2010 45000 A$1.18 53100

October 2010 100000 A$0.89 89000

November 2010 181238 US$0.26 47430

November 2010 28000 A$1.18 33040

November 2010 40000 A$0.89 35600

November 2010 21333 A$0.94 20053

1667581 715296

22

2011

January 2011 50000 A$0.89 44500

January 2011 13333 A$0.50 6667

January 2011 26667 Nil

January 2011 6666 A$0.94 6266

March 2011 40000 US$0.22 8694

May 2011 6667 A$0.70 4667

May 2011 2333 A$0.94 2193

August 2011 8000 A$0.50 4000

November 2011 10000 US$0.26 2518

November 2011 18333 Nil

181999 79504

The funds raised have been and will be used for working capital requirements including the continued

development of our existing pipeline of point-of-care tests and to identify and develop additional tests

Restricted Employee Shares Issued to Employees

Our Employee Share Plan was adopted by the Board of Directors in 2009 The Employee Share Plan permits

our Board to grant shares of our common stock to our employees and directors The number of shares able to be

granted is limited to the amount permitted to be granted at law the ASX Listing Rules and by the limits on our

authorized share capital in our certificate of incorporation All our employees are eligible for shares under the

Employee Plan The Company currently proposes to issue A$1000 worth of restricted shares of common stock

to employees of the Company on recurring basis but no more frequently than annually The restricted shares

have the same terms of issue as our existing shares of common stock but are not able to be traded until the earlier

of three years from the date on which the shares are issued or the date the relevant employee ceases to be an

employee of the Company or any of its associated group of companies We issue these shares in reliance upon

exemptions from registration under Regulation under the Securities Act of 1933 as amended

The table below sets forth the restricted shares issued by the Company

Market Value of

Number of Restricted Restricted Shares

Shares Issued Issued

November 2009 40670 A$69952

May 2010 581 A$ 999

November 2010 47400 A$74892

November 2011 86471 A$76959

Restricted stock awards activity during the current period is as follows

Weighted average

issue price

Number of shares

Balance at December 31 2010 82841 1.64

Granted 86471 0.89

Release of restricted shares 11549 1.64

Balance at December 31 2011 157763 1.23

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

There were no repurchases of equity securities in 2011

23

ITEM SELECTED FINANCIAL DATA

The following table represents our selected financial data for the dates and periods indicated

Years Ended December 31

Revenue

Revenue from products

Revenue from services

Research and development income

Milestone payment

Total revenue

Operating costs expenses

Cost of goods sold

Cost of services

Research and development

General and administrative

Total operating costs expenses

Profitlloss from operations

Other incomelexpense

Interest income

Interest expense

Fee income

Other

Total other income/expense

Net profitiloss before tax

Income tax benefitlexpense

Net profitlloss

Basic net profitlloss per share

Average weighted number of shares

basic

Diluted net profitlloss per share

Average weighted number of shares

diluted

2010 2Q09 2008 2007

AS AS AS A$

11760009 132733

6420027 2850071

1337125

17722641

18180036 22042570

7157216

4226757

11383973

10191958

2542060 1440102

9489

___________10382

1229720

8962238

__________145000

___________8817238

0.07

Balance Sheet Data

Cash and cash equivalents

Total assets

Long-term debt

Convertible preference shares

Years Ended December 31

2011 2010 2009

A$ A$ AS

15089209

45216467

2008 2007

AS AS

3121754

1170190

4291944

1192015

1192015

2011

A$

$12063582

2632870

14696452

12310302

708149

9812396

7271488

30102335

15405883

683323

30443

713766

14692117

14692117

0.09

10801062 458162

1481674 169241 3121754

6482150 14898072 11585258

7185550 5635569 5510127

25950436 21161044 20217139

7770400 881526 15925195

1192889 809459

9636

1131222

33014

1159875

6610525

6610525

004

250886

548937

1430463

1430463

0.01

265310

3929103

11996092

206

11995886

008

159017777 157584044 157013578 156970679 129637286

0.09 0.04 001 0.08 0.07

159017777 157584044 161354802 156970679 129637286

23271766 31291011 28334864 41958285

53837949 56083468 52505321 63512160

Total stockholders equity 35022606 47219079 51314002 48703230 59749624

24

Total Return Stock Performance Graph

The following line graph compares the cumulative total stockholder return on our common stock from

December 31 2006 through December 31 2011 with the cumulative total return of major market index and

published industry index The graph below assumes an investment of A$ 100.00 on December 31 2006 in our

common stock and compares its performance with the Standard and Poors 500 Index and the Standard and

Poors 500 Health Care Index We paid no dividends on our common stock during the period covered by the

graph The Indices included in the graph reflect cumulative total return based upon the reinvestment of

dividends of the stocks included in those indices Measurement points are December 31 2006 and the last trading

day of each subsequent year end through December 31 2011

Comparison of Year Cumulative Total Return

Assumes Initial Investment ofSlOO

December 2011

2tJU.Ut

180.00

160.00

140.00

120.00

100.00

80.00

60.00

40.00

20.00

000

2006 2007 2008 2009 2010 2011

0Universal Biosensors Inc u5P 500 Index Total Returns SP500 Health Care Index

The comparisons shown in the graph above are based upon historical data The stock price performance

shown in the graph is not necessarily indicative of nor is it intended to forecast the potential future performance

of our common stock This graph shall not be deemed filed for purposes of Section 18 of the Securities

Exchange Act of 1934 as amended or the Exchange Act or otherwise subject to the liabilities of that section

and will not be deemed incorporated by reference intoany filing under the Securities Act of 1933 as amended or

the Exchange Act whether made before or after the date hereof regardless of any general incorporation language

in such filing

ITEM MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONANDRESULTS OF OPERATIONS

The information required by this item is incorporated by reference to our 2011 Annual Report under the

caption Managements Discussion and Analysis of Financial Condition and Results of Operations on pages F-2

to F-b

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is incorporated by reference to our 2011 Annual Report under the

caption Managements Discussion and Analysis of Financial Condition and Results of Operations Financial

Risk Management on pageF- 10

25

ITEM FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

We refer you to the Consolidated Balance Sheets Consolidated Statements of Operations

Consolidated Statements of Stockholders Equity and Comprehensive Income Consolidated Statements of

Cash Flows and Notes to Consolidated Financial Statements on pages F-13 through F-36 and Report of

Independent Registered Public Accounting Firm on pages F- 11 through F- 12 of our Annual Report to

Stockholders for the fiscal year ended December 31 2011 which sections are incorporated by reference herein

Supplementary Financial Information

The following is summary of the unaudited quarterly results of operations

Year ended December 31 2011

Quarter Quarter Quarter Quarter

Ended Ended Ended Ended

March31 June30 September30 December31

A$ A$ A$

Revenue

Revenue from products 3319401 2267766 2153518 4322897

Revenue from services 245920 476129 318869 1591952

Research and development income

Milestone payment

Total revenue 3565321 2743895 2472387 5914849

Operating costs expenses

Cost of goods sold 3492052 2694792 2314082 3809376

Cost of services 63519 140987 61257 442386

Research and development 1747507 2969982 2317556 2777351

General and administrative 1405358 1800900 2029467 2035763

Total operating costs expenses 6708436 7606661 6722362 9064876

Profitlloss from operations 3143115 4862766 4249975 3150027

Other incomelexpense

Interest income 224875 179444 145228 133776

Interest expense

Fee income

Other 128992 226486 749727 363806

Total other income/expense 95883 47042 894955 230030

Net profitlloss before tax 3047232 4909808 3355020 3380057

Income tax benefitlexpense

Net profit/loss 3047232 4909808 3355020 3380057

Basic and diluted net loss per share 0.02 0.03 0.02 0.02

Average weighted number of shares used as

denominator 158952569 159012414 159022118 159082531

Diluted net profit/loss per share 0.02 0.03 0.02 0.02

Average weighted number of shares used as

denominator 158952569 159012414 159022118 159082531

26

Year ended December 31 2010

Quarter Quarter Quarter Quarter

Ended Ended Ended Ended

March31 June30 September30 December31

A$ A$ A$ A$

Revenue

Revenue from products 1524813 1359584 3202873 5672739

Revenue from services 1893133 1403779 1785331 1337784

Research and development income

Milestone payment

Total revenue 3417946 2763363 4988204 7010523

Operating costs expenses

Cost of goods sold 1538436 1936716 3136390 4189520

Cost of services 246064 247190 376398 612022

Research and development 1554227 1799551 1543482 1584890

General and administrative 1469609 1788984 1675868 2251089

Total operating costs expenses 4808336 5772441 6732138 8637521

Profitiloss from operations 1390390 3009078 1743934 1626998

Other income/expense

Interest income 305019 327949 289296 270625

Interest expense

Fee income

Other 10291 153984 47473 129234

Total other income/expense 294728 481933 241823 141391

Net profitiloss before tax 1095662 2527145 1502111 1485607

Income tax benefitlexpense

Net profitlloss 1095662 2527145 1502111 1485607

Basic and diluted net loss per share 0.01 0.02 0.01 0.01

Average weighted number of shares used as

denominator 157229023 157307199 157378290 158403507

27

ITEM CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

None

ITEM 9A CONTROLS AND PROCEDURES

Disclosure Controls and Procedures At the end of the period covered by this report the Company

evaluated the effectiveness of the design and operation of its disclosure controls and procedures The Companysdisclosure controls and procedures are designed to ensure that information required to be disclosed by the

Company in the reports that it files or submits under the Exchange Act is recorded processed summarized and

reported within the time periods specified in the SECs rules and forms Disclosure controls and procedures

include without limitation controls and procedures designed to ensure that information required to be disclosed

by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated

to the Companys management including its principal executive and principal financial officers or persons

performing similar functions as appropriate to allow timely decisions regarding required disclosure Paul Wright

Chief Executive Officer and Salesh Balak Chief Financial Officer reviewed and participated in this evaluation

Based on this evaluation Messrs Wright and Balak concluded that as of the end of the period covered by this

report the Companys disclosure controls and procedures were effective

Changes in Internal Control Over Financial Reporting During the fiscal quarter ended December 31

2011 there were no changes in the Companys internal control over financial reporting identified in connection

with the evaluation of such referred to above in this Item 9A that have materially affected or are reasonably

likely to materially affect the Companys internal control over financial reporting

28

MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial

reporting as defined in Rule 3a- 15t under the Exchange Act Our internal control over financial reporting is

process designed to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with generally accepted accounting

principles and includes those policies and procedures that

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the

transactions and the dispositions of the assets of the Company

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of

financial statements in accordance with generally accepted accounting principles and that receipts and

expenditures of the Company are being made only in accordance with authorizations of management and

the board of directors of the Company and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use

or disposition of the Companys assets that could have material effect on the financial statements

Because of its inherent limitations internal control over financial reporting may not prevent or detect

misstatements Also projections of any evaluations of effectiveness to future periods are subject to risk that

controls may become inadequate because of changes in conditions or because of declines in the degree of

compliance with the policies or procedures

Our management with the participation of the Principal Executive Officer an4 Principal Financial Officer

assessed the effectiveness of the Companys internal control over financial reporting as of December 31 2011 In

making this assessment the Companys management used the criteria set forth by the Committee of Sponsoring

Organizations of the Treadway Commission COSO in Internal Control-Integrated Framework

Based on this evaluation our management with the participation of the Principal Executive Officer and

Principal Financial Officer concluded that as of December 31 2011 our internal control over financial

reporting was effective

The effectiveness of the Companys internal control over financial reporting as of December 31 2011 has

been audited by PricewaterhouseCoopers an independent registered public accounting firm as stated in their

report which appears in the Report of Independent Registered Public Accounting Firm on pages F-il to-F- 12

of the Annual Report which is incorporated herein by reference and filed as Exhibit 13 to this Report on

Form 10-K

Is/ Paul Wright Is Salesh Balak

Paul Wright Salesh Balak

Principal Executive Officer Principal Financial Officer

March 13 2012

29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL

CONTROL OVER FINANCIAL REPORTING

We refer you to Report of Independent Registered Public Accounting Firm on pages F-li to F- 12 of our

Annual Report to Stockholders for the fiscal year ended December 31 2011 which are incorporated by reference

herein for the Independent Registered Public Accounting Firms report with respect to the effectiveness of

internal control over financial reporting

30

ITEM 9B OTHER INFORMATION

None

PART III

ITEM 10 DIRECTORS EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item regarding our directors and executive officers is incorporated by

reference to our Definitive Proxy Statement to be filed with the Securities and Exchange Commission in

connection with our Annual Meeting of Stockholders in 2012 the 2012 Proxy Statement under the caption

Management of the Company

The information required by this item regarding Compliance with Section 16a of the Exchange Act is

incorporated by reference to the 2012 Proxy Statement under the caption Other Matters Section 16aBeneficial Ownership Reporting Compliance

We have adopted our Code of Ethics for Senior Financial Officers code of ethics that applies to our

Principal Executive Officer and Principal Financial Officer This code of ethics may be accessed and reviewed

through our website at www.universalbiosensors.com We intend to satisfy any disclosure requirement under

item 5.05 of Form 8-K regarding an amendment to or waiver from provision of the Code of Ethics for our

Principal Executive Officer and Principal Financial Officer by posting such information on our website at

www.universalbiosensors.com

The information regarding the procedures by which security holders may recommend nominees to our

Board of Directors is incorporated by reference to the 2012 Proxy Statement under the caption Management of

the Company Board Committees Remuneration and Nomination Committee There have been no material

changes to the procedures by which security holders may recommend nominees to our Board of Directors

The information required by this item regarding our Audit Committee is incorporated by reference to the

2012 Proxy Statement under the caption Management of the Company Board Committees Audit and

Compliance Committee

ITEM 11 EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the 2012 Proxy Statement under the captions

Management of the Company Compensation of Directors Executive Compensation and Management of the

Company Board Committees Compensation Committee Interlocks and Insider Participation

Discussions on the frequency of the shareholder advisory votes on executive compensation are incorporated

by reference to the 2012 Proxy Statement under the caption Executive Compensation

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED STOCKHOLDER MATTERS

The information regarding the security ownership of certain beneficial owners and management is

incorporated by reference to the 2012 Proxy Statement under the caption Security Ownership of Certain

Beneficial Owners and Management

The information regarding Securities Authorized for Issuance under Equity Compensation Plans is

incorporated by reference to our 2012 Proxy Statement under the caption Executive Compensation Equity

Compensation Plan Information

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR

INDEPENDENCE

The information required by this item is incorporated by reference to the 2012 Proxy Statement under the

caption Certain Relationships and Related Transactions and Management of the Company

31

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated by reference to the 2012 Proxy Statement under the

caption Independent Public Accountants Audit Fees

PART IV

ITEM 15 EXHIBITS FINANCIAL STATEMENTS AND SCHEDULES

a1 Financial Statements

The following financial statements are incorporated by reference from pages F-Il through F-36 of our

Annual Report to Stockholders for the fiscal year ended December 31 2011 as provided in Item hereof

Report of Independent Registered Public Accounting Firm F-Il

Consolidated Balance Sheets F-13

Consolidated Statements of Operations F-14

Consolidated Statements of Stockholders Equity and Comprehensive Income F- 15

Consolidated Statements of Cash Flows F- 16

Notes to Consolidated Financial Statements F- 17

a2 Financial Statement Schedules Schedule 11Valuation and Qualifying Accounts All other

schedules are omitted because of the absence of the conditions under which they are required or

because the required information is included elsewhere in the financial statements

a3 and Exhibits Refer below

Exhibit

Number Description

1.0 Underwriting Agreement by and

between Universal Biosensors Inc

and Wilson HTM Corporate Finance

Limited dated November 2007

3.1 Amended and restated articles of

incorporation dated December 2006

3.2 Amended and restated by-laws dated

December 2006

10.1 License Agreement between

LifeScan and Universal Biosensors

Inc effective April 2002 as

amended on October 25 2007

December 2005

10.2 Amended and Restated License

Agreement between LifeScan Inc

and Universal Biosensors Pty Ltd

dated on August 29 2011 and

effective as of August 19 2011

10.3 Development and Research

Agreement by and between Universal

Biosensors Inc and LifeScan Inc

dated April 2002 as amended on

October 29 2007 June 2007

December 2005 December 21

2004 and March 31 2004

Location

Incorporated by reference to our Current Report on Form 8-K

filed on November 16 2007 as Exhibit 1.1

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 3.1

Incorporated by reference to our Amendment No to Form 10

filed on April 29 2008 as Exhibit 3.2

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.1

October 2007 amendment incorporated by reference to our

Form 10-Q filed on November 14 2007 as Exhibit 10.2

Incorporated by reference to our Current Report on Form 8-K

filed on August 30 2011 as Exhibitl0l

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.2

June 2007 amendment incorporated by reference to our

Amendment No to Form 10 filed on June 12 2007 as

Exhibit 10.2 October 2007 amendment incorporated by

reference to our Form l0-Q filed on November 14 2007 as

Exhibit 10.3

32

Amended and Restated Development

and Research Agreement between

Cilag GmbH International and

Universal Biosensors Pty Ltd dated

on August 29 2011 and effective as

of August 19 2011

10.5 Form of indemnity agreement entered

into with directors of us our chief

fmancial officer and company secretary

10.6 Lease of premises Corporate

Avenue Rowville Victoria Australia

by and between Universal

Biosensors Pty Ltd and Heyram

Properties Pty Ltd

10.7 Auslndustiy RD Start Program

Agreement effective February 25 2005

particular and general conditions

10.8 Employee Option Plan

10.9 Employment agreement between

Universal Biosensors Pty Ltd and

Mr Salesh Balak effective

November 27 2006

10.10 Employment agreement between

Universal Biosensors Pty Ltd and Mr

Garry Chambers effective April 12006

10.11 Employment agreement between

Universal Biosensors Pty Ltd and Dr

Ronald Chatelier dated April 2006

10.12 Employment agreement between

Universal Biosensors Pty Ltd and Dr

Alastair Hodges effective April 12006

10.13 Employment agreement between

Universal Biosensors Pty Ltd and MrAdrian Oates dated August 15 2007

10.14 Master Services and Supply

Agreement by and between Universal

Biosensors Pty Ltd Universal

Biosensors Inc and LifeScan Inc

dated October 29 2007

10.15 First Amendment to the Master

services and Supply Agreement dated

December 11 2008 which amends the

Master Services and Supply

Agreement by and between Universal

Biosensors Pty Ltd Universal

Biosensors Inc and LifeScan Inc

dated October 29 2007 and filed on

November 14 2007 as Exhibit 10.1 to

our Quarterly Report on Form l0-Q

Incorporated by reference to our Current Report on Form 8-K

filed on August 30 2011 as Exhibit 10.2

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.3

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.5

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.6

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.7

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.8

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.9

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.10

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 10.11

Incorporated by reference to our Form 10-K filed on March 16

2010 as Exhibit 10.12

Incorporated by reference to our Quarterly Report on Form lO-Q

filed on November 14 2007 as Exhibit 10.1 Confidentiality

treatment has been granted for portions of this exhibit These

confidential portions have been omitted and were filed separately

with the SEC

Incorporated by reference to our Annual Report on Form 10-K

filed on March 30 2009 as Exhibit 10.14

10.4

33

10.16 Second Services Addendum

manufacturing Process Support

which amends the Master Services

and Supply Agreement by and

between Universal Biosensors Pty

Ltd Universal Biosensors Inc and

LifeScan Inc dated October 292007 incorporated by reference to

our Quarterly Report on Form 10-Q

filed on November 14 2007 as

Exhibit 101

10.17 Advanced Care Enhanced Product

Agreement which is an addendum

to the Amended and Restated Master

Services and Supply Agreement filed

on August 2009 as Exhibit 10.3 to

our Quarterly Report on Form 10-Q

10.18 Fifth Amendment to Development

and Research Agreement which

amends the Development and

Research Agreement by and between

Universal Biosensors Inc and

LifeScan Inc dated April 2002

and filed on April 30 2007 as Exhibit

10.2 to our Form 10 the Amendment

to the Development and Research

Agreement filed on June 12 as

Exhibit 10.2 to Amendment No to

our Form 10 and the Amendment to

Development and Research

Agreement filed on November 14

2007 as Exhibit 10.3 to our Quarterly

Report on Form 10-Q

10.19 Amended and Restated Master

Services and Supply Agreement

which amends and restates the

Master Services and Supply

Agreement by and between

Universal Biosensors Pty LtdUniversal Biosensors Inc and

LifeScan Inc dated October 292007 filed on November 14 2007 as

Exhibit 10.1 to our Quarterly Report

on Form 10-Q and the First

Amendment to the Master Services

and Supply Agreement filed on

March 30 2009 as Exhibit 10.14 to

our Annual Report on Form 10-K

10.20 Manufacturing Initiation PaymentAddendum to Master Services and

Supply Agreement which is an

addendum to the Amended and

Restated Master Services and Supply

Agreement filed on August 2009

as Exhibit 10.3 to our Quarterly

Report on Form l0-Q

Incorporated by reference to our Annual Report on Form 10-K

filed on March 30 2009 as Exhibit 10.15

Incorporated by reference to our Quarterly Report on Form l0-Q

filed on August 2009 as Exhibit 10.1 Confidentiality

treatment has been granted for portions of this exhibit These

confidential portions have been omitted and were filed separately

with the SEC

Incorporated by reference to our Quarterly Report on Form l0-Q

filed on August 2009 as Exhibit 10.2

Incorporated by reference to our Quarterly Report on Form l0-Q

filed on August 2009 as Exhibit 10.3 Confidentiality

treatment has been granted for portions of this exhibit These

confidential portions have been omitted and were filed separately

with the SEC

Incorporated by reference to our Quarterly Report on Form l0-Q

filed on August 2009 as Exhibit 10.4 Confidentiality

treatment has been granted for portions of this exhibit These

confidential portions have been omitted and were filed separately

with the SEC

34

10.21 Employment agreement between

Universal Biosensors Pty Ltd and

Mr Andrew Denver dated

September 2010

10.22 Collaboration Agreement between

Universal Biosensors Pty Ltd and

Siemens Healthcare Diagnostics Inc

dated September 2011

10.23 Statement of Work for MAP

Feasibility Project between Universal

Biosensors Pty Ltd LifeScan Inc and

Cilag GmbH International dated

October 11 2011

10.24 Novation Agreement and First

Amendment to the Amended and

Restated Master Services and Supply

Agreement between Universal

Biosensors Inc Universal

Biosensors Pty Ltd LifeScan Inc

and Cilag GmbH International dated

October 112011

10.25 Second Amendment to the Amended

and Restated Master Services and

Supply Agreement between

Universal Biosensors Inc Universal

Biosensors Pty Ltd LifeScan Inc

and Cilag GmbH International dated

October 11 2011

10.26 Employment agreement between

Universal Biosensors Pty Ltd and MrPaul Wright effective March 12011

10.27 Employment agreement between

Universal Biosensors Pty Ltd and Mr

Fred Davis effective November 2011

13.0 Annual Report

14.0 Code of Ethics

21.0 List of Subsidiaries

Power of Attorney

Certification of Principal Executive

Officer pursuant to Section 302 of

the Sarbanes-Oxley Act

31.2 Certification of Principal Financial

Officer pursuant to Section 302 of

the Sarbanes-Oxley Act

32.0 Certification of Principal Executive

Officer and Principal Financial

Officer pursuant to Section 906 of

the Sarbanes-Oxley Act

Incorporated by reference to our Current Report on Form 8-K/A

filed on December 22 2010 as Exhibit 10.1

Incorporated by reference to our Quarterly Report on Form 10-Q

filed on November 2011 as Exhibit 10.20 Confidentiality

treatment has been granted for portions of this exhibit These

confidential portions have been omitted and were filed separately

with the SEC

Incorporated by reference to our Quarterly Report on Form 10-Q

filed on November 2011 as Exhibit 10.21 Confidentiality

treatment has been granted for portions of this exhibit These

confidential portions have been omitted and were filed separately

with the SEC

Incorporated by reference to our Quarterly Report on Form l0-Q

filed on November 2011 as Exhibit 10.22

Incorporated by reference to our Quarterly Report on Form 0-Q

filed on November 2011 as Exhibit 10.23 Confidentiality

treatment has been granted for portions of this exhibit These

confidential portions have been omitted and were filed separately

with the SEC

Incorporated by reference to our Current Report on Form 8-K

filed on February 25 2011 as Exhibit 10.1

Filed herewith

Filed herewith

Incorporated by reference to our Annual Report on Form 10-K

filed on March 28 2008 as Exhibit 14.0

Incorporated by reference to our General Form for Registration

of Securities on Form 10 filed on April 30 2007 as Exhibit 21.0

Included on signature page

Filed herewith

24.0

31.1

Filed herewith

Filed herewith

35

101 The following materials from the

Universal Biosensors Inc Annual

Report on Form 10-K for the

financial year ended December 31

2011 formatted in Extensible

Business Reporting Language

XBRL the Consolidated

Condensed Balance Sheets ii the

Consolidated Condensed Statements

of Operations iii the Consolidated

Condensed Statements of

Changes in Stockholders Equity and

Comprehensive Income iv the

Consolidated Condensed Statements

of Cash Flows and the Notes to

Consolidated Condensed Financial

Statements tagged as blocks of text

As provided in Rule 406T of Regulation S-T this information is

furnished herewith and not filed for purposes of Sections 11 and

12 of the Securities Act of 1933 and Section 18 of the Securities

Exchange Act of 1934

36

SIGNATURES

Pursuant to the requirements of Section 13 or 15d of the Securities Exchange Act of 1934 the registrant

has duly caused this Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized

Universal Biosensors Inc

Registrant

By Is Paul Wright

Paul Wright

Date March 13 2012 Principal Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints Paul Wright and Salesh Balak

and each of them his or her attorneys-in-fact each with the power of substitution for him or her and in his or her

name place and stead in any and all capacities to sign any and all amendments to this report on Form 10-K and

to file the same with all exhibits thereto and all documents in connection therewith with the Securities and

Exchange Commission granting unto said attorneys-in-fact and agents and each of them full power and

authority to do and perform each and every act and all intents andpurposes as he or she might or could do in

person hereby ratifying and confirming all that such attorneys in-fact and agents or any of them or his or their

substitute or substitutes may lawfully do or cause to be done by virtue thereof

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed by the

following on behalf of the registrant and in the capacities and on the dates indicated

Signature Title Date

Is Paul Wright Chief Executive Officer March 13 2012

Paul Wright Principal Executive Officer

Is Salesh Balak Chief Financial Officer March 13 2012

Salesh Balak Principal Financial Officer

Is Andrew Denver Director and Chairman March 13 2012

Andrew Denver

Is Denis Hanley Director March 13 2012

Denis Hanley

Is Andrew Jane Director March 13 2012

Andrew Jane

Is Elizabeth Wilson Director March 13 2012

Elizabeth Wilson

Is Cohn Adam Director March 13 2012

Cohn Adam

/s Marshall Heinberg Director March 13 2012

Marshall Heinberg

37

Exhibit 13

Universal Biosensors Inc

2011 Annual Report

Contents

Managements Discussion and Analysis of Financial Condition and Results of Operations F-2

Report of Independent Registered Public Accounting Firm F-Il

Consolidated Balance Sheets F-13

Consolidated Statements of Operations F- 14

Consolidated Statements of Stockholders Equity and Comprehensive Income F- 15

Consolidated Statements of Cash Flows F- 16

Notes to Consolidated Financial Statements F- 17

Schedule ii Valuation and Qualifying Accounts F-36

F-i

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

The following discussion and analysis of our financial condition and results of operations should be read in

conjunction with our financial statements and related notes that appear elsewhere in this Annual Report In

addition to historical financial information the following discussion contains forward-looking statements that

reflect our plans estimates and beliefs Our actual results may differ materially from those discussed in the

forward-looking statements in our Form 10-K Factors that could cause or contribute to these differences include

those discussed below and elsewhere in our Form 10-K particularly in Risk Factors

Our Business

We are specialist medical diagnostics company focused on the research development and manufacture of

in vitro diagnostic test devices for consumer and professional point-of-care use

We were incorporated in the State of Delaware on September 14 2001 and our shares of common stock in

the form of CHESS Depositary Interests CDIs have been quoted on the Australian Securities Exchange

ASX since December 13 2006 Our securities are not currently traded on any other public market Our

wholly owned subsidiary and primary operating vehicle Universal Biosensors Pty Ltd UBS was incorporated

as proprietary limited company in Australia on September 21 2001 UBS conducts our research development

and manufacturing activities in Melbourne Australia

We have rights to an extensive patent portfolio with certain patents owned by UBS and number licensed to

UBS under license agreement between LifeScan Inc LifeScan and UBS License Agreement Unless

otherwise noted references to LifeScan in this document are references collectively or individually to LifeScan

Inc and/or LifeScan Europe division of Cilag GmbH International both affiliates of Johnson and Johnson

We are using our electrochemical cell technology platform to develop tests for number of different

markets Our current focus is as set out below

Blood glucose UBS provides services and acts as non-exclusive manufacturer of test strips for

LifeScans OneTouch Verio pursuant to Master Services and Supply Agreement with LifeScan

Master Services and Supply Agreement LifeScan continues its global rollout of the OneTouch Verio

product which is currently available in North America major European markets and Australia We also

undertake research and development work for LifeScan pursuant to development and research

agreement Development and Research Agreement

Coagulation testing market UBS is working with Siemens Healthcare Diagnostics Inc Siemens to

develop range of test strips and reader products for the point-of-care coagulation market pursuant to

collaboration agreement Collaboration Agreement

Other electrochemical-cell based tests we are working on proving the broader applicability of our

technology platform for other immunoassay and molecular diagnostic point-of-care tests We may seek to

enter into collaborative arrangements or strategic alliances with respect to any tests arising from this work

Results of Operations

Revenue from Products

OneTouch VerioTM was first launched in the Netherlands in January 2010 and has subsequently been

launched in Australia in major European markets and North America The manufacturing results of the blood

glucose test strips during the respective periods are as follows

Years Ended December 31

2011 2010 2009

A$

Revenue from products 12063582 11760009 132733

Cost of goods sold 12310302 10801062 458162

246720 958947 325429

F-2

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

Pursuant to the agreement we have with LifeScan one of two pricing methodologies will apply depending

on whether we are manufacturing above or below specified quantity of blood glucose test strips in quarter If

less than the specified quantity of test strips is produced within quarter we are considered to be in the interim

costing period In the interim costing period the Company is not expected to generate any profit from the

manufacture of test strips but is expected to recover most of its glucose manufacturing costs If manufactured

volumes increase beyond the specified quantity of blood glucose test strips per quarter the interim costing period

will cease to apply and different pricing methodology will apply at which time we expect our blood glucose

manufacturing operations to be profitable We commenced commercial production in 2009 and operated under

the interim costing period regime during that year During 2010 and 2011 we ceased to be in the interim costing

period during the fourth quarter of each of 2010 and 2011 at which time we generated profits from our blood

glucose manufacturing operations Our quarterly results from our blood glucose manufacturing operations for the

2011 and 2010 financial year reflect this

2011 Quarter Ended

December31 September30 June30 March31

A$

4322897 2153518 2267766 3319401

3809376 2314082 2694792 3492052

513521 160564 427026 172651

2010 Quarter Ended

September30 June30

3202873 1359584

3136390 1936716

66483 577132

Revenue from products

Cost of goods sold

Revenue from products

Cost of goods sold_________ ________ ________ ________

December31 March31

A$

5672739 1524813

4189520_________ _________

1538436

1483219________

13623

During 2009 LifeScan chose not to proceed with the registration of the then current product but to proceed

with an enhanced product called One-Touch Verio and acknowledged that there would be delay as result As

result of this change LifeScan agreed to pay us an additional amount per strip manufactured by us up to

certain volume in 2010 In 2011 as long as we remained in the interim costing period LifeScan agreed to pay us

an additional amount per strip equivalent to 50% of the amount agreed with LifeScan in 2010 These additional

payments ceased during the third quarter of 2011 resulting in the higher margin in the last quarter of 2010 when

compared to the same period in 2011 and the small profit in the third quarter of 2010

We provide various services to our customers and partners The revenue is grouped into the following

categories

Contract research and development we undertake contract research and development on behalf of our

customers and partners Contract research and development revenue up to the 2009 financial year has

been recorded under the caption Research and development income As we commenced commercial

production in 2010 the research and development was seen more as service we provide which meant

presenting it within Revenue from Services

Product enhancement service fee based on the number of strips sold by our customers and partners is

payable to us as an ongoing reward for our services and efforts to enhance the product

Other services ad-hoc services provided on an agreed basis based on our customers and partners

requirements

Revenue from Services

F-3

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

There are different arrangements for each service being provided The net margin during the respective

periods in relation to the provision of services is as follows

Years Ended December 31

2011 2010 2009

A$ A$

Revenue from services 2632870 6420027 2850071

Cost of services 708149 1481674 169241

1924721 4938353 2680830

Income Research and development income 1337125

Contract research and development makes up the major portion of revenue from services The nature and

scope of contract research and development is determined by our customers and partners based upon their

requirements hence our revenues and margins tend to fluctuate This is reflected in our past three years results

wherein the margin during the 2011 financial year has decreased by 61% compared to the 2010 financial year

while the margin during the 2010 financial year has increased by 23% compared to the 2009 financial year In

September 2011 we commenced new research and development project for LifeScan to determine the

feasibility of an innovative blood glucose product The feasibility project is expected to take 12 months Revenue

is recognized for the feasibility project when services havebeen performed the amount of the payment can be

reliably measured and collectability is reasonably assured We recognize revenue for accounting purposes ratably

over the feasibility period

We received non-refundable payment of US$3 million in September 2011 upon entering into collaboration

agreement with Siemens This deliverable is not separate unit of accounting and has been recorded as deferred

revenue and will be recognized as revenue across the deliverables in the arrangement with Siemens

Milestone Payment

We received milestone payment of A$17722641 in 2009 triggered by the first grant to LifeScan of

regulatory clearance to sell the blood glucose test

Research and Development Expenses

Research and development expenses are related to developing electrochemical cell platform technologies

Research and development expenses consist of costs associated with research activities as well as costs

associated with our product development efforts including pilot manufacturing costs Research and development

expenses include

consultant and employee related expenses which include consulting fees salary and benefits

materials and consumables acquired for the research and development activities

external research and development expenses incurred under agreements with third party organizations and

universities and

facilities depreciation and other allocated expenses which include direct and allocated expenses for rent

and maintenance of facilities depreciation of leasehold improvements and equipment and laboratory and

other supplies

Our principal research and development activities can be described as follows

Blood coagulation

Since 2005 we have undertaken development work on prothrombin time test for monitoring the

therapeutic range of the anticoagulant warfarin based on measuring activity of the enzyme thrombin In

F-4

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

September 2011 we entered into collaboration agreement with Siemens pursuant to which will develop range

of test strips and reader products for the point-of-care coagulation market The first test to be developed will be

modified version of Prothrombin Time International Normalized Ratio PT-INR test developed by UBSfollowed by other tests in the point-of-care coagulation market

Immunoassay

We are continuing to develop our immunoassay platform We are developing D-dimer test for the

detection and monitoring of several conditions associated with thrombotic disease particularly deep venous

thrombosis clots in the leg and pulmonary embolism clots in the lung Development work on this project has

been undertaken since early 2008

This work will allow the electrochemical cell platform technology to be expanded to range of

immunoassay tests

DNA/RNA

We have undertaken some early stage feasibility work assessing the possibility of using DNA binding

chemistries to build strip test for DNA RNA and as possible alternative method for improving the sensitivity

of protein assaysThis concept work is at an early stage and may not yield any positive results We have recently

entered into license to access certain molecular diagnostic technology

Research and development expenses for the respective periods are as follows

Years Ended December 31

2011 2010 2009

Research and development expenses 9812396 6482150 14898072

Depending on the number of research and development activities we undertake and the development phase

of the research and development our research and development expenditure will fluctuate Research and

development expenditure increased by 51% during 2011 compared to 2010 and decreased by 56% during 2010

compared to 2009 Research and development expenses for 2009 reflect the conclusion of the development phase

for the blood glucose product wherein significant amount of the work was carried out All costs pertaining to

this project after January 2010 are now captured in cost of goods sold as opposed to being treated as research

and development expenditure as they were prior to January 2010 During 2010 and 2011 our research and

development activities were primarily focussed around the blood coagulation platform Whilst we had

established feasibility of the first product on this platform the prothrombin time test in 2010 we were at an

advanced stage in 2011 During 2011 we had entered the formal development and validation stage of the

prothrombin time test An increased volume of work is required during this development phase of research and

development During the latter half of 2011 we also commenced work on range of other test strips and reader

products for the point-of-care coagulation market pursuant to our agreement with Siemens

While we have degree of control as to how much we spend on research and development activities in the

future we cannot predict what it will cost to complete our individual research and development programs

successfully or when or if they will be commercialized The timing and cost of any program is dependent upon

achieving technical objectives which are inherently uncertain

In addition our business strategy contemplates that we may enter into collaborative arrangements with third

parties for one or more of our non-blood glucose programs In the event that we are successful in securing such

third party collaborative arrangements the third party will direct the research and development activities which

will influence our research and development expenditure and these parties may contribute towards all or part of

the cost of these activities

F-5

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

General and Administrative Expenses

General and administrative expenses currently consist principally of salaries and related costs including

stock option expense for personnel in executive business development finance accounting information

technology and human resources functions Other general and administrative expenses include depreciation

repairs and maintenance insurance facility costs not otherwise included in research and development expenses

consultancy fees and professional fees for legal audit and accounting services

General and administrative expenses for the respective periods are as follows

Years Ended December 31

2011 2010 2009

General and administrative expenses 7271488 7185550 5635569

General and administrative expenses increased by 1% during 2011 compared to 2010 and increased by 28%

during 2010 compared to 2009 This increase in expenses particularly during 2010 reflects efforts put into

business development to establish collaborative partnerships in the fields outside the area of glucose and

diabetes 2010 was also the first financial year wherein our auditors had to undertake internal controls work in

order to furnish an attestation report regarding internal controls over financial reporting as required under the

Sarbanes Oxley Act This resulted in us incurring additional expenditure

Interest Income

Interest income decreased to A$683323 in 2011 from A$1192889 in 2010 The decrease in interest income

is attributable to the lower amounts of funds available for investment Interest income increased to A$ 1192889

in 2010 from A$809459 in 2009 The increase in interest income is attributable to increased returns on the funds

invested and the higher amounts of funds available for investment

Critical Accounting Estimates and Judgments

Our consolidated financial statements are prepared in accordance with accounting principles generally

accepted in the United States of America U.S GAAP The preparation of these consolidated financial

statements requires us to make estimates and assumptions that affect the reported amounts of assets liabilities

income costs and expenses and related disclosures We evaluate our estimates and assumptions on an ongoing

basis Our actual results may differ from these estimates

We believe that of our significant accounting policies which are described in the notes to our consolidated

financial statements the following accounting policies involve greater degree of judgment and complexity

Accordingly we believe that the following accounting policies are the most critical to aid in fully understanding

and evaluating our consolidated financial condition and results of operations

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists delivery has

occurred the sales price is fixed or determinable and collection is probable Product is considered delivered to

the customer once it has been shipped and title and risk of loss have been transferred

In addition the Company enters into arrangements which contain multiple revenue generating activities

The revenue for these arrangements is recognized as each activity is performed or delivered based on the relative

fair value and the allocation of revenue to all deliverables based on their relative selling price In such

circumstances the Company uses hierarchy to determine the selling price to be used for allocation of revenue

to deliverables vendor-specific objective evidence third-party evidence of selling price and best estimate of

selling price The Companys process for determining its best estimate of selling price for deliverables without

F-6

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

vendor-specific objective evidence or third-party evidence of selling price involves managements judgment The

Companys process considers multiple factors that may vary depending upon the unique facts and circumstances

related to each deliverable

Stock-Based Compensation

We account for stock-based employee compensation arrangements using the modified prospective method

as prescribed in accordance with the provisions of ASC 718Compensation Stock Compensation

Each of the inputs to the Trinomial Lattice model is discussed below

Share Price at Valuation Date

The value of the options granted in 2010 and 2011 has been determined using the closing price of our

common stock trading in the form of CDIs on ASX at the time of grant of the options The value of the options

granted in 2009 have been determined using the average closing price of the Companys common stock on the

ASX on the five days on which the Companys common stock has traded prior to the approval of grant The ASXis the only exchange upon which our securities are quoted

Volatility

We applied volatility having regard to the historical price change of our shares in the form of CDIs available

from the ASX

Time to Expiry

All options granted under our share option plan have maximum 10 year term and are non-transferable

Risk Free Rate

The risk free rate which we applied is equivalent to the yield on an Australian government bond with time

to expiry approximately equal to the expected time to expiry on the options being valued

Income Taxes

We apply ASC 740 Income Taxes which establishes financial accounting and reporting standards for the

effects of income taxes that result from companys activities during the current and preceding years Deferred

tax assets and liabilities are recognized for the future tax consequences attributable to differences between the

financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating

loss and tax credit carry forwards Deferred tax assets and liabilities are measured using enacted tax rates

expected to apply to taxable income in the years in which those temporary differences are expected to be

recovered or settled The effect on deferred tax assets and liabilities of change in tax rates is recognized in

income in the period that includes the enactment date

Where it is more likely than not that some portion or all of the deferred tax assets will not be realized the

deferred tax assets are reduced by valuation allowance The valuation allowance is sufficient to reduce the

deferred tax assets to the amount that is more likely than not to be realized

Impairment of Long-Lived Assets

We review our capital assets including patents and licenses for impairment whenever events or changes in

business circumstances indicate that the carrying amount of the assets may not be fully recoverable In performing the

review we estimate undiscounted cash flows from products under development that are covered by these patents and

licenses An impairment loss would be recognized when estimated undiscounted future cash flows expected to result

from the use of the asset and its eventual disposition is less than the carrying amount of the asset If the evaluation

indicates that the carrying value of an asset is not recoverable from its undiscounted cash flows an impairment loss is

measured by comparing the canying value of the asset to its fair value based on discounted cash flows

F-7

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

Financial Condition Liquidity and Capital Resources

Net Financial Assets

Our net financial assets position is shown below

Years Ended December 31

2011 2010 2009

A$

Financial assets

Cash and cash equivalents 15089209 23271766 31291011

Accounts receivables 4889783 3588798 415397

Financial instruments 83339

Total financial assets 20062331 26860564 31706408

Debt

Short and long term debt/borrowings

Financial instruments 47412

Total debt 47412

Net financial assets 20062331 26860564 31658996

We rely largely on our existing cash and cash equivalents and funds from our operations to provide for the

working capital needs of our operations We believe we have sufficient cash and cash equivalents to fund our

operations for at least the next twelve months

Measures of Liquidiy and Capital Resources

The following table provides certain relevant measures of liquidity and capital resources

Years Ended December 31

2011 2010 2009

A$ A$

Cash and cash equivalents 15089209 23271766 31291011

Working capital 17584523 25940899 32118842

Ratio of current assets to current liabilities 3.51 6.82 1305

Shareholders equity per common share 022 0.30 0.33

The movement in cash and cash equivalents and working capital in each of the years was primarily due to

the timing of cash receipts payments sales and accruals in the ordinary course of business 2009 was also

impacted by the receipt of milestone payment of A$ 17722641 We have not identified any collection issues

with respect to receivables

Summary of Cash Flows

Years Ended December 31

2011 2010 2009

A$

Cash provided by/used in

Operating activities 7159118 6414248 5867156

Investing activities 1102943 2320293 2990007

Financing activities 79504 715296 78998

Net increase/decrease in cash and cash equivalents 8182557 8019245 2956147

F-8

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

Our net cash used in operating activities in 2011 and 2010 was primarily for our research and development

projects including efforts involved in establishing our manufacturing The outflows during these two years have

been partially offset by receipts from our customers and partners The positive operating activity result in 2009 is

predominantly as result of the receipt of the milestone payment of A$17722641 in December 2009

Our net cash used in investing activities for all years is primarily for the purchase of various plant and

equipment and fit out of our facilities based on our needs

Our net cash provided by financing activities is primarily proceeds received from employees exercising their

options

Off-Balance Sheet Arrangement

The future minimum lease payments under non-cancellable operating leases with initial or remaining lease

terms in excess of one year as of December 31 2011 are

Less than year 556082

13 years 714244

35 years

More thanyears

Total minimum lease payments 1270326

The above relates to our operating lease obligations in relation to the lease of our premises and certain office

equipment

Contractual Obligations

Our future contractual obligations at December 31 2011 were as follows

Payments Due By Period

Total Less than years years More than

Asset Retirement Obligations1 2166691 2166691

Operating Lease Obligations2 1270326 556082 714244

Purchase Obligations3 3173761 1773761 1400000

Other Long-Term Liabilities on

Balance Sheet4 181367 119237 55860 6270

Total 6792145 2329843 2233481 2222551 6270

Represents legal obligations associated with the retirement and removal of long-lived assets

Our operating lease obligations relate primarily to the lease of our premises

Represents outstanding purchase orders and contractual obligations that are payable on the achievement of

certain milestones

Represents long service leave owing to the employees

Segments

We operate in one segment Our principal activities are research and development commercial manufacture

of approved medical or testing devices and the provision of services including contract research work We

operate predominantly in one geographical area being Australia

F-9

Managements Discussion and Analysis of Financial Condition and Results of Operations

Universal Biosensors Inc

Recent Accounting Pronouncements

See Notes to Consolidated Financial Statements Note Summary of Significant Accounting Policies

Financial Risk Management

The overall objective of our financial risk management program is to seek to minimize the impact of foreign

exchange rate movements and interest rate movements on our earnings We manage these financial exposures

through operational means and by using financial instruments These practices may change as economic

conditions change

Foreign Currency Market Risk

We transact business in various foreign currencies including U.S dollars and Euros We have established

foreign currency hedging program using forward contracts to hedge the net projected exposure for each currency

and the anticipated sales and purchases in U.S dollars and Euros The goal of this hedging program is to

economically guarantee or lock-in the exchange rates on our foreign exchange exposures The Company does not

hold or issue derivative financial instruments for trading purposes However derivatives that do not qualify for

hedge accounting are accounted for as trading instruments

The following table sets out the notional amounts and weighted average exchange rates by expected

contractual maturity dates These notional amounts generally are used to calculate the contractual payments to

be exchanged under the contract

2012 Fair Value

Anticipated Transactions and Related Derivatives

AUD Functional Currency

Forward exchange agreements Sell USDIBuy AUDContract amount US$4000000 A$4114179

Average contractual exchange rate 0.9923

Expected maturity or transaction date

Interest Rate Risk

Since the majority of our investments are in cash and cash equivalents in AUD our exposure to interest

income is affected by changes in the general level of Australian interest rates The primary objective of our

investment activities is to preserve principal while at the same time maximizing the income we receive without

significantly increasing risk Our investment portfolio is subject to interest rate risk but due to the short duration

of our investment portfolio we believe an immediate 10% change in interest rates would not be material to our

financial condition or results of operations

Inflation

Our business is subject to the general risks of inflation Our results of operations depend on our ability to

anticipate and react to changes in the price of raw materials and other related costs over which we may have little

control Our inability to anticipate and respond effectively to an adverse change in the price could have

significant adverse effect on our results of operations In the face of increasing costs the Company strives to

maintain its profit margins through cost reduction programs productivity improvements and periodic price

increases

F- 10

iLpwc

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Universal Biosensors Inc

In our opinion the accompanying consolidated balance sheets and the related consolidated statements of

operations consolidated statements of stockholders equity and comprehensive income and consolidated

statements of cash flows present fairly in all material respects the financial position of Universal Biosensors

Inc and its subsidiaries at December 31 2011 and December 31 2010 and the results of their operations and

their cash flows for each of the three years in the period ended December 31 2011 in conformity with accounting

principles generally accepted in the United States of America In addition in our opinion the financial statement

schedule listed in the appendix under Item l5a2 present fairly in all material respects the information set

forth therein when read in conjunction with the related consolidated financial statements Also in our opinion the

Company maintained in all material respects effective internal control over financial reporting as of

December 31 2011 based on criteria established in Internal Control Integrated Framework issued by the

Committee of Sponsoring Organizations of the Treadway Commission COSO The Companys management is

responsible for these financial statements and financial statement schedule for maintaining effective internal

control over financial reporting and for its assessment of the effectiveness of internal control over financial

reporting included in Managements Report on Internal Control over Financial Reporting appearing under

Item 9A Our responsibility is to express opinions on these financial statements on the financial statement

schedule and on the Companys internal control over financial reporting based on our audits which were

integrated audits in 2011 and 2010 We conducted our audits in accordance with the standards of the Public

Company Accounting Oversight Board United States Those standards require that we plan and perform the

audits to obtain reasonable assurance about whether the financial statements are free of material misstatement

and whether effective internal control over financial reporting was maintained in all material respects Our audits

of the financial statements included examining on test basis evidence supporting the amounts and disclosures

in the financial statements assessing the accounting principles used and significant estimates made by

management and evaluating the overall financial statement presentation Our audit of internal control over

financial reporting included obtaining an understanding of internal control over financial reporting assessing the

risk that material weakness exists and testing and evaluating the design and operating effectiveness of internal

control based on the assessed risk Our audits also included performing such other procedures as we considered

necessary in the circumstances We believe that our audits provide reasonable basis for our opinions

companys internal control over financial reporting is process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with generally accepted accounting principles companys internal control over financial reporting

includes those policies and procedures that pertain to the maintenance of records that in reasonable detail

accurately and fairly reflect the transactions and dispositions of the assets of the company iiprovide reasonable

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance

with generally accepted accounting principles and that receipts and expenditures of the company are being made

only in accordance with authorizations of management and directors of the company and iii provide reasonable

assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the

companys assets that could have material effect on the financial statements

PricewaterhouseCoopers ABN 52 780 433 757

Darling Park Tower 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney

61 8266 0000 61 8266 9999 www.pwc.com.au

F- 11

pwcBecause of its inherent limitations internal control over financial reporting may not prevent or detect

misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions or that the degree of compliance with the

policies or procedures may deteriorate

Is PricewaterhouseCoopers

PricewaterhouseCoopers

Sydney

March 13 2012

PricewaterhouseCoopers ABN 52 780 433 757

Darling Park Tower 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney

61 8266 0000 61 8266 9999 www.pwc.com.au

F- 12

Universal Biosensors Inc

Consolidated Balance Sheets

December 31 December 312011 2010

A$ A$

ASSETS

Current assets

Cash and cash equivalents 15089209 23271766

Inventories net 3619400 3191093

Accounts receivable 4889783 3588798

Prepayments 92048 303181

Financial instruments 83339

Other current assets 827508 46196

Total current assets 24601287 30401034

Non-current assets

Property plant and equipment 33151027 32713280

Less accumulated depreciation 12855847 9586365

Property plant and equipment net 20295180 23126915

Other non-current assets 320000 310000

Total non-current assets 20615180 23436915

Total assets 45216467 53837949

LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities

Accounts payable 620682 1764364

Accrued expenses 2061528 2099477

Deferred revenue 3509721

Employee entitlements provision 824833 596294

Total current liabilities 7016764 4460135

Non-current liabilities

Asset retirement obligations 2166691 1998060

Employee entitlements provision 181367 160675

Deferred revenue 829039

Total non-current liabilities 3177097 2158735

Total liabilities 10193861 6618870

Commitments and contingencies Note

Stockholders equity

Preferred stock $0.01 par value Authorized 1000000 sharesand

outstanding nil in 20112010 nil

Common stock $00001 par value Authorized 300000000 shares issued and outstanding

159139965 shares in 2011 2010 158871495 15914 15887

Additional paid-in capital 79446995 77034717

Accumulated deficit 29533213 22922688Current year loss 14692117 6610525Accumulated other comprehensive income 214973 298312

Total stockholders equity 35022606 47219079

Total liabilities and stockholders equity 45216467 53837949

See accompanying notes to the financial statements

F- 13

Universal Biosensors Inc

Consolidated Statements of Operations

Years Ended December 31

2011 2010 2009

Revenue

Revenue from products 12063582 11760009 132733

Revenue from services 2632870 6420027 2850071

Research and development income 1337125

Milestone payment 17722641

Total revenue 14696452 18180036 22042570

Operating costs expenses

Cost of goods sold 12310302 10801062 458162

Cost of services 708149 1481674 169241

Research and development 9812396 6482150 14898072

General and administrative 7271488 7185550 5635569

Total operating costs expenses 30102335 25950436 21161044

Profitiloss from operations 15405883 7770400 881526

Other income/expense

Interest income 683323 1192889 809459

Interest expense 9636

Other 30443 33014 250886

Total other income/expense 713766 1159875 548937

Net profit/Ioss before tax 14692117 6610525 1430463

Income tax benefit/expense

Net profitiloss 14692117 6610525 1430463

Basic net profit/loss per share 0.09 0.04 0.01

Average weighted number of shares basic 159017777 157584044 157013578

Diluted net profit/loss per share 0.09 0.04 0.01

Average weighted number of shares diluted 159017777 157584044 161354802

See accompanying notes to the financial statements

F- 14

Universal Biosensors Inc

Consolidated Statements of Stockholders Equity and Comprehensive Income

Additional Other TotalOrdinary sharea

Paid-in Accumulated Comprehensive Stockholders

Shares Amount Capital Deficit Income Equity

AS AS AS

Balances at January 12009 156976936 15698 73338995 24353151 298312 48703230

Comprehensive Income

Unrealised loss on derivatives

and hedges 47412 47412

Net profit 1430463 1430463

Total Comprehensive income .. 1383051

Exercise of stock options issued to

employees 138327 14 78984 78998

Shares issued to employees 40670 69948 69952

Stock option expense 1078771 1078771

Balances at December 31 2009 157155933 15716 74566698 22922688 345724 51314002

Comprehensive income

Unrealised gain on derivatives and

hedges 47412 47412

Net loss 6610525 6610525

Total Comprehensive income 6563113

Exercise of stock options issued to

employees 1667581 167 715129 715296

Shares issued to employees 47981 75887 75891

Stockoptionexpense 1677003 1677003

Balances at December 312010 158871495 15887 77034717 29533213 298312 47219079

Comprehensive income

Unrealised gain on derivatives and

hedges 83339 83339

Net loss 14692117 14692117

Total Comprehensive income 14608778

Exercise of stock options issued to

employees 181999 18 79486 79504

Shares issued to employees 86471 76950 76959

Stock option expense 2255842 2255842

Balances at December 312011 159139965 15914 79446995 44225330 214973 35022606

See accompanying notes to the financial statements

F- 15

Universal Biosensors Inc

Consolidated Statements of Cash Flows

Years Ended December 31

2011 2010 2009

Cash flows from operating activities provided by/used in

Net profit/loss 14692117 6610525 1430463

Adjustments to reconcile net profitlloss to net cash provided by

used in operating activities

Depreciation and amortization 3298541 2990858 2851285

Share based payments expense 2255842 1677003 1078771

Loss on fixed assets disposal 17715 2618 60658

Change in assets and liabilities

Inventory 428307 2885969 305124

Accounts receivables 1300985 3733332 114713

Prepaid expenses and other current assets 725797 6079 141331

Deferred revenue 4492426 118305 290904

Employee entitlements 249231 73493 50192

Accounts payable and accrued expenses 325667 1959380 383389

Net cash provided by/used in operating activities 7159118 6414248 5867156

Cash flows from investing activities

Instalment payments to acquire plant and equipment 988334 2145808

Purchases of property plant and equipment 1102943 1331959 844199

Net cash used in investing activities 1102943 2320293 2990007

Cash flows from financing activities

Proceeds from borrowings 479673

Repayment of borrowings 479673

Proceeds from stock options exercised 79504 715296 78998

Net cash provided by financing activities 79504 715296 78998

Net increasedecrease in cash and cash equivalents 8182557 8019245 2956147

Cash and cash equivalent at beginning of period 23271766 31291011 28334864

Cash and cash equivalents at end of period 15089209 23271766 31291011

See accompanying notes to the financial statement

F- 16

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Basis of Presentation

These consolidated financial statements are presented in accordance with accounting principles generally

accepted in the United States of America U.S GAAP All amounts are expressed in Australian dollars

AUD or As unless otherwise stated

The Companys consolidated financial statements have been prepared assuming the Company will continue as

going concern We rely largely on our existing cash and cash equivalents balance and operating cash flow to provide

for the working capital needs of our operations We believe we have sufficient cash and cash equivalents to fund our

operations for at least the next twelve months However in the event our financing needs for the foreseeable future are

not able to be met by our existing cash and cash equivalents balance and operating cash flow we would seek to raise

funds through public or private equity offerings debt fmancings and through other means to meet the financing

requirements There is no assurance that funding would be available at acceptable terms if at all

During 2010 the Group consisting of Universal Biosensors Inc and its wholly owned subsidiary

Universal Biosensors Pty Ltd ceased to be development stage enterprise as it has established its commercial

scale manufacturing and is generating revenue from its manufacturing operations

Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly owned

subsidiary UBS All intercompany balances and transactions have been eliminated on consolidation

Use of Estimates

The preparation of the consolidated financial statements requires management of the Company to make

number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure

of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of

revenues and expenses during the period Significant items subject to such estimates and assumptions include the

carrying amount of property plant and equipment deferred income taxes asset retirement obligations and

obligations related to employee benefits Actual results could differ from those estimates

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation

Cash Cash Equivalents

The Company considers all highly liquid investments purchased with an initial maturity of three months or

less to be cash equivalents For cash and cash equivalents the carrying amount approximates fair value due to the

short maturity of those instruments

Short-Term Investments Held-to-maturity

Short-term investments constitute all highly liquid investments with term to maturity from three months to

twelve months The carrying amount of short-term investments is equivalent to its fair value

Concentration of Credit Risk and Other Risks and Uncertainties

Cash and cash equivalents and accounts receivables consists of financial instruments that potentially subject

the Company to concentration of credit risk to the extent of the amount recorded on the balance sheet The

Companys cash and cash equivalents are invested with two of Australias four largest banks The Company is

exposed to credit risk in the event of default by the banks holding the cash or cash equivalents to the extent of the

F- 17

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

amount recorded on the balance sheets The Company has not experienced any losses on its deposits of cash and

cash equivalents The Company has not identified any collectability issues with respect to receivables

Derivative Instruments and Hedging Activities

Derivative financial instruments

The Company uses derivative financial instruments to hedge its exposure to foreign exchange arising from

operating investing and financing activities The Company does not hold or issue derivative financial

instruments for trading purposes However derivatives that do not qualify for hedge accounting are accounted for

as trading instruments

Derivative financial instruments are recognized initially at fair value Subsequent to initial recognition

derivative financial instruments are stated at fair value The gain or loss on remeasurement to fair value is

recognized immediately in the income statement However where derivatives qualify for hedge accounting

recognition ofany

resultant gain or loss depends on the nature of the item being hedged

Cash flow hedges

Exposure to foreign exchange risks arises in the normal course of the Companys business and it is the

Companys policy to use forward exchange contracts to hedge anticipated sales and purchases in foreign

currencies The amount of forward cover taken is in accordance with approved policy and internal forecasts

Where derivative financial instrument is designated as hedge of the variability in cash flows of

recognized asset or liability or highly probable forecast transaction the effective part of any unrealised gain or

loss on the derivative financial instrument is recognized directly in equity When the forecast transaction

subsequently results in the recognition of non-financial asset or non-financial liability the associated

cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the

non-financial asset or liability

For cash flow hedges other than those covered by the preceding statement the associated cumulative gain

or loss is removed from equity and recognized in the consolidated statements of operations in the same period or

periods during which the hedged forecast transaction affects the consolidated statements of operations and on the

same line item as that hedged forecast transaction The ineffective part of any gain or loss is recognized

immediately in the consolidated statements of operations

When hedging instrument expires or is sold terminated or exercised or the Company revokes designation

of the hedge relationship but the hedged forecast transaction is still probable to occur the cumulative gain or loss

at that point remains in equity and is recognized in accordance with the above policy when the transaction occurs

If the hedged transaction is no longer expected to take place then the cumulative unrealized gain or loss

recognized in equity is recognized immediately in the consolidated statements of operations

Inventory

Inventories are stated at the lower of cost or net realizable value Net realizable value is the estimated selling

price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to

dispose Inventories are principally determined under the average cost method which approximates cost Cost

comprises direct materials direct labour and an appropriate portion of variable and fixed overhead expenditure

the latter being allocated on the basis of normal operating capacity Cost also includes the transfer from equity of

F- 18

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

any gains/losses on qualifying cash flow hedges relating to purchases of raw material Costs of purchased

inventory are determined after deducting rebates and discounts

Years Ended December 31

2011 2010 2009

A$ A$

Raw materials 3254675 2798045 289069

Work inprogress 102239 188629 16055

Finished goods 262486 204419

3619400 3191093 305124

Receivables

Trade accounts receivable are recorded at the invoiced amount and do not bear interest The allowance for

doubtful accounts is the best estimate of the amount of probable credit losses in the existing accounts receivable

The allowance is determined based on review of individual accounts for collectibility generally focusing on

those accounts that are past due The current year expense to adjust the allowance for doubtful accounts if any is

recorded within general and administrative expenses in the consolidated statements of operations Account

balances are charged against the allowance when it is probable the receivable will not be recovered

Years Ended December 31

2011 2010 2009

A$ A$

Accounts receivable 4889783 3588798 415397

Allowance for doubtful debts

4889783 3588798 415397

Property Plant and Equipment

Property plant and equipment are recorded at acquisition cost less accumulated depreciation

Depreciation on plant and equipment is calculated using the straight-line method over the estimated useful

lives of the assets The estimated useful life of machinery and equipment is to 10 years Leasehold

improvements are amortized on the straight-line method over the shorter of the remaining lease term or estimated

useful life of the asset Maintenance and repairs are charged to operations as incurred and include normal

services and does not include items of capital nature

The Company receives Victorian government grant monies under grant agreements to support our

development activities including in connection with the purchase of plant and equipment Plant and equipment is

presented net of the government grant The grant monies are recognized against the acquisition costs of the

related plant and equipment as and when the related assets are purchased

Research and Development

Research and development expenses consist of costs incurred to further the Groups research and

development activities and include salaries and related employee benefits costs associated with clinical trial and

preclinical development regulatory activities research-related overhead expenses costs associated with the

manufacture of clinical trial material costs associated with developing commercial manufacturing process

costs for consultants and related contract research facility costs and depreciation Research and development

costs are expensed as incurred

F- 19

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Research and development expenses for years ended December31 2011 2010 and 2009 are as follows

Years Ended December 31

2011 2010 2009

A$

Research and development expenses 9812396 6482150 14898072

Income Taxes

The Company applies ASC 740Income Taxes which establishes fmancial accounting and reporting standards for

the effects of income taxes that result from companys activities during the current and preceding years Deferred tax

assets and liabilities are recognized for the future tax consequences atiributable to differences between the fmancial

statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit

carry forwards Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income

in the years in which those temporary differences are expected to be recovered or settled The effect on deferred tax assets

and liabilities of change in tax rates is recognized in income in the period that includes the enactment date

Where it is more likely than not that some portion or all of the deferred tax assets will not be realized the

deferred tax assets are reduced by valuation allowance The valuation allowance is sufficient to reduce the

deferred tax assets to the amount that is more likely than not to be realized reconciliation of the valuation and

qualifying accounts is attached as Schedule ii

We are subject to income taxes in the United States and Australia U.S federal income tax returns up to the

2010 financial year have been filed Internationally consolidated income tax returns up to the 2010 financial year

have been filed

Asset Retirement Obligations

Asset retirement obligations ARO are legal obligations associated with the retirement and removal of long-

lived assets ASC 410 Asset Retirement and Environmental Obligations requires entities to record the fair value of

liability for an asset retirement obligation when it is incurred When the liability is initially recorded the Company

capitalizes the cost by increasing the carrying amounts of the related property plant and equipment Over time the

liabilityincreases for the change in its present value while the capitalized cost depreciates over the useful life of the

asset The Company derecognizes ARO liabilities when the related obligations are settled

The ARO is in relation to our premises where in accordance with the terms of the lease the lessee has to

restore part of the building upon vacating the premises

Our overall ARO changed as follows

Years Ended December 31

2011 2010

Opening balance at January 1998060 1842547

Accretion expense 168631 155513

Ending balance at December 31 2166691 1998060

Fair Value of Financial Instruments

The carrying value of all current assets and current liabilities approximates fair value because of their short-

term nature The estimated fair value of all other amounts has been determined depending on the nature and

complexity of the assets or the liability by using one or all of the following approaches

Market approach based on market prices and other information from market transactions involving

identical or comparable assets or liabilities

F-20

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Cost approach based on the cost to acquire or construct comparable assets less an allowance for

functional and/or economic obsolescence

Income approach based on the present value of future stream of net cash flows

These fair value methodologies depend on the following types of inputs

Quoted prices for identical assets or liabilities in active markets Level inputs

Quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar

assets or liabilities in markets that are nt active or are directly or indirectly observable Level inputs

Unobservable inputs that reflect estimates and assumptions Level inputs

Impairment of Long-Lived Assets

The Company reviews its capital assets including patents and licenses for impairment whenever events or

changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable In

performing the review the Company estimates undiscounted cash flows from products under development that

are covered by these patents and licenses An impairment loss would be recognized when estimated undiscounted

future cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying

amount of the asset If the evaluation indicates that the carrying value of an asset is not recoverable from its

undiscounted cash flows an impairment loss is measured by comparing the carrying value of the asset to its fair

value based on discounted cash flows

Australian Goods and Senices Tax GST

Revenues expenses and assets are recognized net of the amount of associated GST unless the GST incurred

is not recoverable from the taxation authority In this case it is recognized as part of the cost of acquisition of the

asset or as part of the expense Receivables and payables are stated inclusive of the amount of GST receivable or

payable The net amount of GST recoverable from or payable to the taxation authority is included with other

receivables or payables in the balance sheet

Revenue Recognition

We recognize revenue from all sources based on the provisions of the U.S SECs Staff Accounting Bulletin

No 104 and ASC 605 Revenue Recognition

The Companys revenue represents revenue from sales of products provision of services and collaborative

research and development agreements

We recognize revenue from sales of products at the time title of goods passes to the buyer and the buyer

assumes the risks and rewards of ownership assuming all other revenue recognition criteria have been met

Generally this is at the time products are shipped to the customer

Revenue from services are recognized when persuasive evidence of an arrangement exists services have been

rendered the price is fixed or determinable and collectability is reasonably assured Revenue recognition principles are

assessed for each new contractual arrangement and the appropriate accounting is detennined for each service

Where our agreements contain multiple elements or deliverables such as the manufacture and sale of

products provision of services or research and development activities they are assessed to determine whether

separate delivery of the individual elements of such arrangements comprises more than one unit of accounting

Where an arrangement can be divided into separate units of accounting each unit constituting separate earnings

process the arrangement consideration is allocated amongst those varying units based on the relative selling

F-2

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

price of the separate units of accounting and the applicable revenue recognition criteria applied to the separate

units Selling prices are determined using fair value either vendor specific objective evidence or third party

evidence of the selling price when available or the Companys best estimate of selling price when fair value is

not available for given unit of accounting

Under ASC 605-25 which the Company adopted on January 2009 the delivered items are separate

units of accounting provided the delivered items have value to customer on stand-alone basis and ii if

the arrangement includes general right of return relative to the delivered item delivery or performance of the

undelivered items is considered probable and substantially in our control Where the arrangement cannot be

divided into separate units the individual deliverables are combined as single unit of accounting and the total

arrangement consideration is recognized across other deliverables in the arrangement or over the estimated

collaboration period Payments under these arrangements typically include one or more of the following

non-refundable upfront payments funding of research and/or development efforts and milestone payments

We typically generate milestone payments from our customers pursuant to the various agreements we have

with them Non-refundable milestone payments which represent the achievement of significant technical

regulatory hurdle in the research and development process pursuant to collaborative agreements and are deemed

to be substantive are recognized as revenue uponthe achievement of the specified milestone If the

non-refundable milestone payment is not substantive or stand-alone value the non-refundable milestone payment

is deferred and recognized as revenue either over the estimated performance period stipulated in the agreement or

across other deliverables in the arrangement

Management has concluded that the core operations of the Company are expected to be the research and

development activities commercial manufacture of approved medical or testing devices and the provision of

services The Companys ultimate goal is to utilize the underlying technology and skill base for the development of

marketable product that the Company will manufacture The Company considers revenue from the sales of

products revenue from services and the income received from milestone payments indicative of its core operating

activities or revenue producing goals of the Company and as such have accounted for this income as revenues

Product and Service Agreements

In October 2007 the Company and LifeScan entered into Master Services and Supply Agreement under

which the Company would provide certain services to LifeS can in the field of blood glucose monitoring and act

as non-exclusive manufacturer of blood glucose test strips The Master Services and Supply Agreement was

subsequently amended and restated in May 2009 The Company has concluded the Master Services and Supply

Agreement should be accounted for as three separate units of accounting research and development to assist

LifeScan in receiving regulatory clearance to sell the blood glucose product milestone payment contract

manufacturing of the blood glucose test strips contract manufacturing and ongoing services and efforts to

enhance the product product enhancement

All consideration within the Master Services and Supply agreement is contingent The Company concluded

the undelivered items were not priced at significant incremental discount to the delivered items and revenue for

each deliverable will be recognized as each contingency is met and the consideration becomes fixed and

determinable The milestone payment was considered to be substantive payment and the entire amount has been

recognized as revenue when the regulatory approval was received Revenues for contract manufacturing and

ongoing efforts to enhance the product are recognised as revenue from products or revenue from services

respectively when the four basic criteria for revenue recognition are met

In October 2011 the Company entered into Statement of Work agreement with LifeScan to provide

services for feasibility study for an innovative blood glucose product The services relating to this agreement

are expected to take 12 months to complete which commenced in September 2011

F-22

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Research and Development Agreement

On September 2011 the Company entered into new collaboration agreement with Siemens to develop

coagulation related products for hospital point-of-care and ambulatory care coagulation markets In addition to an

up-front non-refundable payment of US$3 million the Company may receive up to six payments from Siemens

upon the achievement of certain defined milestones relating to feasibility regulatory submissions and the launch of

the products to be developed The Company has concluded that the up-front payment is not separate unit of

accounting and recorded the amount as deferred revenue to be recognized as revenue across other deliverables in the

arrangement with Siemens based upon the Companys best estimate of selling price The deliverables related to

each milestone are considered substantive and are not priced at significant incremental discount to the other

deliverables As the achievement of the milestones is contingent upon future event the revenue for each

deliverable will be recognized as the contingencies are met and the consideration becomes fixed and determinable

Interest income

Interest income is recognized as it accrues taking into account the effective yield on the cash and cash

equivalents

Foreign Currency

Functional and reporting currency

Items included in the financial statements of each of the Groups entities are measured using the currency of

the primary economic environment in which the entity operates the functional currency The functional

currency of the Company and UBS is AUD or A$ for all years presented

The consolidated financial statements are presented using reporting currency of Australian dollars

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing

at the dates of the transactions Foreign exchange gains and losses resulting from the settlement of such

transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in

foreign currencies are recognized in the consolidated statements of operations

The Company has recorded foreign currency transaction losses of A$4442 A$5 12474 and A$250886 in

each of the years ended December 31 2011 2010 and 2009 respectively

The results and financial position of all the Group entities that have functional currency different from the

reporting currency are translated into the reporting currency as follows

assets and liabilities for each balance sheet item reported are translated at the closing rate at the date of

that balance sheet

income and expenses for each income statement are translated at average exchange rates unless this is

not reasonable approximation of the effect of the rates prevailing on the transaction dates in which case

income and expenses are translated at the dates of the transactions and

all resulting exchange differences are recognized as separate component of equity

On consolidation exchange differences arising from the translation of any net investment in foreign entities

are taken to the Accumulated Other Comprehensive Income

Commitments and Contingencies

Liabilities for loss contingencies arising from claims assessments litigation fines and penalties and other

sources are recorded when it is probable that liability has been incurred and the amount of the assessment can

be reasonably estimated These were nil as at December 31 2011 2010 nil

F-23

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Patent and License Costs

Legal fees incurred for patent application costs have been charged to expense and reported in research and

development expense Legal fees incurred for patents relating to commercialized products are capitalized and

amortized over the life of the patents

Clinical Trial Expenses

Clinical trial costs are component of research and development expenses These expenses include fees

paid to participating hospitals and other service providers which conduct certain testing activities on behalf of

the Company Depending on the timing of payments to the service providers and the level of service provided

the Company records prepaid or accrued expenses relating to these costs

These prepaid or accrued expenses are based on estimates of the work performed under service agreements

Leased Assets

All of the Companys leases for the years ended December 31 2011 2010 and 2009 are considered

operating leases The costs of operating leases are charged to the statement of operations on straight-line basis

over the lease term

Stock-based Compensation

We measure stock-based compensation at grant date based on the estimated fair value of the award and

recognize the cost as an expense on straight-line basis over the vesting period of the award We estimate the

fair value of stock options using the Trinomial Lattice model We also grant our employees Restricted Stock

Units RSUs and Zero Priced Employee Options ZEPO5 RSUs are stock awards granted to employees

that entitle the holder to shares of common stock as the award vests ZEPOs are stock options granted to

employees that entitle the holder to shares of common stock as the award vests The value of RSUs and ZEPOs

are determined and fixed on the grant date based on the Companys stock price See note for further details

We record deferred tax assets for awards that will result in deductions on our income tax returns based on

the amount of compensation cost recognized and our statutory tax rate in the jurisdiction in which we will receive

deduction Differences between the deferred tax assets recognized for financial reporting purposes and the

actual tax deduction reported in our income tax return are recorded inexpense or in capital in excess of par value

if the tax deduction exceeds the deferred tax assets or to the extent that previously recognized credits to

paid-in-capital are still available if the tax deduction is less than the deferred tax asset

Employee Benefit Costs

The Company contributes to standard defined contribution superannuation funds on behalf of all employees

at nine percent of each such employees salary Superannuation is compulsory savings program whereby

employers are required to pay portion of an employees remuneration to an approved superannuation fund that

the employee is typically not able to access until they are retired The Company permits employees to choose an

approved and registered superannuation fund into which the contributions are paid Contributions are charged to

the statement of operations as they become payable

Net Profit/Loss per Share and Anti-dilutive Securities

Basic and diluted net profitlloss per share is presented in conformity with ASC 260 Earnings perShare

Basic and diluted net profitlloss per share has been computed using the weighted-average number of common

shares outstanding during the period Other than in profit making yearthe potentially dilutive options issued

under the Universal Biosensors Employee Option Plan were not considered in the computation of diluted net

profit/loss per share because they would be anti-dilutive given the Companys loss making position

F-24

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Total Comprehensive Income

The Company follows ASC 220 Comprehensive Income Comprehensive income is defined as the total

change in shareholders equity during the period other than from transactions with shareholders and for the

Company includes net income and cumulative translation adjustments

Recent Accounting Pronouncements

In December 2011 the FASB issued ASU 2011-11 which amended the disclosure requirements regarding

offsetting assets and liabilities of derivatives sale and repurchase agreements reverse sale and repurchase

agreements and securities borrowing and securities lending arrangements The enhanced disclosures will require

entities to provide both net and gross information for these assets and liabilities The amendment is effective for

fiscal years beginning on or after January 2013 The Company does not anticipate that this amendment will

have material impact on its financial statements

In June 2011 the FASB issued ASU No 20 11-05 Comprehensive Income Topic 220 Presentation of

Comprehensive Income The new guidance allows an entity to present components of net income and other

comprehensive income in one continuous statement referred to as the statement of comprehensive income or in

two separate but consecutive statements The guidance eliminates the current option to report other

comprehensive income and its components in the statement of changes in equity While the new guidance

changes the presentation of comprehensive income there are no changes to the components that are recognized

in net income or other comprehensive income under current accounting guidance This new guidance is effective

for fiscal years and interim periods beginning after December 15 2011 This guidance will result in change in

the way we present Other Comprehensive Income and its components but will not have an impact on our

financial position results of operations or cash flows

In May 2011 the FASB issued ASU No 2011-04 Fair Value Measurement Topic 820 Amendments to

Achieve Common Fair Value Measurement and Disclosure Requirements in U.S generally accepted accounting

principles GAAP and International Financial Reporting Standards IFRS This ASU is intended to result in

convergence between U.S GAAP and IFRS requirements for measurement of and disclosures about fair value

The guidance amends current fair value measurement and disclosure guidance to include increased transparency

around valuation inputs and investment categorization This new guidance is effective for fiscal years and interim

periods beginning after December 15 2011 We do not believe the adoption of the new guidance will have

significant impact on the companys consolidated financial statements

Commitments and Contingent Liabilities

Operating Leases

UBS entered into lease with respect to premises at Corporate Avenue Rowville Victoria which

commenced on November 2006 for an initial period of seven years and five months with two options to renew

the lease for successive five-year periods The Companys primary bank has issued bank guarantee of

A$250000 in relation to rental bond to secure the payments under the lease This bank guarantee is secured by

security deposit held at the bank and has been recorded as Other Assets in Consolidated Balance Sheets

In accordance with the terms of the lease the lessee has to restore part of the building upon vacating the

premises

The Company has also entered into lease with respect to certain office equipment The lease is for period

of 60 months which commenced in December 2007

F-25

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Future minimum lease payments under non-cancelable operating leases with initial or remaining lease

terms in excess of one year as of December 31 2011 are

2012 556082

2013 567932

2014 146312

2015 and thereafter

Total minimum lease payments 1270326

Rent expense was A$576301 A$556584 and A$533749 for the fiscal years ended December 31 2011

2010 and 2009 respectively

Government research grants

On October 28 2006 Universal Biosensors Pty Ltd was awarded grant by the State of Victoria to support

the establishment of medical diagnostic manufacturing facility in Victoria Australia for the manufacture of

new technologies for disease monitoring and to increase support of local and export markets These payments are

subject to the achievement of milestones which include capital expenditure by Universal Biosensors Pty Ltd of

predetermined minimum amounts The State of Victoria may require Universal Biosensors Pty Ltd to refund any

amounts paid under the grant together with interest should Universal Biosensors Pty Ltd commit breach of its

obligations under the grant agreement The State of Victoria may also withhold suspend cancel or terminate any

payment or payments upon failure to comply with obligations or if Universal Biosensors Ply Ltd chooses not to

proceed with these initiatives or it becomes insolvent The total amount received under the Victorian State

Government Grant during 2011 was A$55346 2010 A$39875 2009 A$130000 This grant has been

recognized against the acquisition cost of the related plant and equipment

On October 2010 Universal Biosensors Pty Ltd was awarded grant of A$250000 by the State of

Victoria to assist in the upgrade of the current manufacturing facility to ultimately support the production of

strips for new point of care test These payments are subject to the achievement of milestones which include

capital expenditure by Universal Biosensors Pty Ltd of predetermined minimum amounts The State of Victoria

may require Universal Biosensors Pty Ltd to refund any amounts paid under the grant together with interest

should Universal Biosensors Pty Ltd fail to complete the upgrade within stipulated timeframe or fails to fulfill

its commitments towards the upgrade The State of Victoria may also withhold suspend cancel or terminate any

payment or payments upon failure to comply with obligations or if Universal Biosensors Pty Ltd chooses not to

proceed with these initiatives or it becomes insolvent The total amount received under the Victorian State

Government Grant during 2011 was A$175000 2010 Nil This grant has been recognized against the

acquisition cost of the related plant and equipment

Guarantees

There are cross guarantees given by Universal Biosensors Inc and Universal Biosensors Pty Ltd as described

in note 15 No deficiencies of assets exist in any of these companies No liability was recognized by the parent

entity or the consolidated entity in relation to this guarantee as the fair value of the guarantees is immaterial

Income Taxes

The Company is subject to income tax in Australia and is required to pay taxes on its Australian profits As

provided under the Australian income tax laws the Company and its wholly owned resident subsidiary have

formed tax-consolidated group Universal Biosensors Inc is required to lodge U.S federal income tax returns

It currently is in tax loss situation

F-26

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

reconciliation of the benefit/provision for income taxes with the amount computed by applying the

Australian statutory company tax rate of 30% to the profit/Ioss before income taxes is as follows

Years ended December 31

2011 2010 2009

AS AS

Profit/loss before income taxes 14692117 6610525 1430463

Computed by applying income tax rate of home

jurisdiction 4407635 30 1983157 30 429139 30

Research development incentive 635470 421341 3524333 246Disallowed expenses/income

Share based payment 676753 503100 323631 22

Other 8849 4730 226924 16Change in valuation allowance 4357503 30 1896668 29 2998487 210

Income tax expense/benefit

Significant components of the Companys deferred tax assets are shown below

As of December 31

2011 AS 2010A$

Deferred tax assets

Operating loss carry forwards 16794322 12923654

Unamortized capital raising cost 1000 104850

Depreciation and amortization 378385 663990

Asset retirement obligations 650007 599418

Employee entitlements 301860 227090

Other 987644 807923

Total deferred tax assets 18356448 13998945

Valuation allowance for deferred tax assets 18356448 13998945

Net deferred tax asset

Significant components of deferred income taxes reflect the net tax effect of temporary differences between

the carrying amounts of assets and liabilities for financial reporting and tax purposes valuation allowance has

been established as realization of such assets is not more likely than not

At December 31 2011 the Company has A$5598 1074 A$43078848 at December 31 2010 of

accumulated tax losses available for carry forward against future earnings which under Australian tax laws do

not expire but may not be available under certain circumstances

Employee Incentive Schemes

Stock Option Plan

In 2004 the Company adopted an employee option plan Plan Options may be granted pursuant to the

Plan to any person considered by the board to be employed by the Group on permanent basis whether full

time part time or on long term casual basis Each option gives the holder the right to subscribe for one share of

common stock The total number of options that may be issued under the Plan is such maximum amount

permitted by law and the Listing Rules of the Australian Securities Exchange ASX The exercise price and

F-27

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

any exercise conditions are determined by the board at the time of grant of the options Any exercise conditions

must be satisfied before the options vest and become capable of exercise The options lapse on such date

determined by the board at the time of grant or earlier in accordance with the Plan Options granted to date have

had term up to 10 years and generally vest in equal tranches over three years

An option holder is not permitted to participate in bonus issue or new issue of securities in respect of an

option held prior to the issue of shares to the option holder pursuant to the exercise of an option If Universal

Biosensors changes the number of issued shares through or as result of any consolidation subdivision or

similar reconstruction of the issued capital of the Company the total number of options and the exercise price of

the options as applicable will likewise be adjusted Options granted in 2009 2010 and 2011 were 4164200914500 and 3555500 respectively

In accordance with ASC 718 the fair value of the option grants was estimated on the date of each grant

using the Trinomial Lattice model The assumptions for these grants were

Grant Date

Nov-il Nov-li Sep-il Mar-11 Feb-il Nov-10 Nov.10 Feb-10 Nov-09 Jun-09 Jun-09 May-09 Feb-09

Exercise Price A$ Nil 0.89 1.00 1.37 1.38 Nil 1.58 1.6 1.72 Nil 0.94 Nil 0.5

Share Price at Grant Date A$ 0.89 0.89 1.00 1.37 1.38 1.58 1.58 1.6 1.73 0.95 0.95 1.18 0.43

Volatility 68% 68% 69% 70% 71% 72% 72% 77% 78% 80% 80% 81% 77%

Expected Life years 10 10 10 10 10

Risk Free Interest Rate 3.72% 3.72% 3.89% 5.36% 5.45% 5.27% 5.27% 5.34% 5.63% 5.49% 5.49% 4.87% 4.26%

Fair VaiueofOptionA$ 0.89 052 0.59 0.83 0.83 1.58 0.96 0.99 1.13 0.95 0.62 1.04 0.28

Each of the inputs to the Trinomial Lattice model is discussed below

Share price at valuation date

The value of the options granted in 2010 and 2011 has been determined using the closing price of our

common stock trading in the form of CDIs on ASX at the time of grant of the options The value of the options

granted in 2009 have been determined using the average closing price of the Companys common stock on the

ASX on the five days on which the Companys common stock has traded prior to the approval of grant The ASXis the only exchange upon which our securities are quoted

Volatility

We applied volatility having regard to the historical price change of our shares in the form of CDIs available

from the ASX

Time to Expiry

All options granted under our share option plan have maximum 10 year term and are non-transferable

Risk free rate

The risk free rate which we applied is equivalent to the yield on an Australian government bond with time

to expiry approximately equal to the expected time to expiry on the options being valued

F-28

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Stock option activity during the current period is as follows

Weighted

Number of average

shares exercise price

A$

Balance at December31 2010 8539704 0.93

Granted 3355500 1.25

Exercised 181999 0.46

Lapsed 295669 1.33

Balance at December31 2011 11417536 1.02

At December 31 2011 the number of options exercisable was 80116912010 5908214 and 2009

5808324 At December 31 2011 total stock compensation expense recognized in income statement was

A$2255842 2010 A$1677003 and 2009 A$1078771

The following table represents information relating to stock options outstanding under the plans as of

December 31 2011

Options Outstanding

Weighted

average Options

remaining Exercisable

Exercise Price Shares life in years Shares

$0.30 1516770 200 1516770

$0.35 443099 4.00 443099

$1.18 623000 5.20 623000

$1.20 590000 5.70 590000

$1.13

$0.89 824000 6.20 824000

$0.70 224667 6.60 224667

$0.50 81333 7.10 81333

Nil 58334 7.40 58334

$0.94 1201000 7.50 1201000Nil 410000 7.50 116663

$1.72 1568333 7.90 1053345$1.60 50000 5.10 33332

$1.58 383500 5.90 127819Nil 100000 5.90 33333$1.37 355000 6.20 118330

$1.38 2300000 6.10 966666

$1.00 86000 6.70

$0.89 502500 6.90

Nil 100000 6.90

11417536 8011691

F-29

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

The table below sets forth the number of employee stock options exercised and the number of shares issued

in the period from December 31 2009 We issued these shares in reliance upon exemptions from registration

under Regulation under the Securities Act of 1933 as amended

Number of Options

Exercised and

Corresponding

Number of Shares Weighted Average Proceeds

Period Ending Issued Exercise Price Received

A$ A$

2009 138327 0.60 78998

2010 1667581 0.49 715296

2011 181999 0.46 79504

Total 1987907 873798

As of December 31 2011 there was A$ 1673079 of unrecognized compensation expense related to

unvested share-based compensation arrangements under the Employee Option Plan This expense is expected to

be recognized as follows

Fiscal Year

2012 1208797

2013 412575

2014 51707

1673079

The aggregate intrinsic value for all options outstanding as at December 31 2011 was zero

Restricted Share Plan

Our Employee Share Plan was adopted by the Board of Directors in 2009 The Employee Share Plan permits

our Board to grant shares of our common stock to our employees and directors The number of shares able to be

granted is limited to the amount permitted to be granted at law the ASX Listing Rules and by the limits on our

authorized share capital in our certificate of incorporation All our employees are eligible for shares under the

Employee Plan The Company currently proposes to continue to issue A$ 1000 worth of restricted shares of

common stock to employees of the Company on recurring basis but no more frequently than annually The

restricted shares have the same terms of issue as our existing shares of common stock but are not able to be

traded until the earlier of three years from the date on which the shares are issued or the date the relevant

employee ceases to be an employee of the Company or any of its associated group of companies

The table below sets forth the restricted shares issued by the Company

MarketNumber of Value of

Restricted Restricted

Shares Issued Shares Issued

November 2009 40670 A$69952

May 2010 581 A$ 999

November 2010 47400 A$74892

November 2011 86471 A$76959

F-30

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Restricted stock awards activity during the current period is as follows

Weighted

Number of average

shares issue price

Balance at December 31 2010 82841 1.64

Granted 86471 0.89

Release of restricted shares 11549 1.64

Balance at December 31 2011 157763 1.23

Related Party Transactions

Details of related party transactions material to the operations of the Group other than compensation

arrangements expense allowances and other similar items in the ordinary course of business are set out below

In September2011 we entered into license agreement with SpeeDx Pty Ltd SpeeDx pursuant to which

SpeeDx granted us license in the field of molecular diagnostics Under the agreement we make milestone payments

totaling A$500000 if certain specified targets are achieved and payments ranging from 5% to 15% of our sales and

licensing revenues to SpeeDx Messrs Denver and Jane are directors of the Company and SpeeDx Pty Ltd Certain of

our substantial shareholders also hold substantial shareholdings in SpeeDx CM Capital Pty Ltd which holds

approximately 11% of our shares and of which Mr Jane is director holds approximately 34% of the issued shares in

SpeeDx PPM Cornerstone Limited which holds approximately 8% of our shares and of which Messrs Denver and

Hanley and Dr Adam are directors holds approximately 34% of the issued shares in SpeeDx Johnson Johnson

Development Corporation has beneficial interest in approximately 9% of our shares An affiliate of Johnson

Johnson Johnson and Johnson Research Pty Ltd owns approximately 13% of issued shares in SpeeDx

Based on the latest Amendment to Schedule 13G filed on January 25 2012 Johnson and Johnson Development

Corporation venture capital wholly owned subsidiary of Johnson Johnson beneficially held 14915400 shares in

the Company as at December31 2011 which represents approximately 9.4% of the Companys shares

The following transactions occurred with LifeScan

As of December 31

2011 2010 2009

A$ A$

Current Receivables Owing by LifeScan

Sale of goods 1999764 3588798

Sale of services 2890019

4889783 3588798

Current Liabilities Owing to LifeScan

Purchase of goods 786708

Revenue from LifeScan

Revenue from products 12063582 11760009 132733

Revenue from services 2632870 6420027 2850071

Research and develoment income 1337125

Milestone payment 17722641

14696452 18180036 22042570

F-3

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Financial Instruments

Fizancial Assets

Years Ended December 31

2011 2010 2009

A$ A$

Financial assets

Cash and cash equivalents 15089209 23271766 31291011

Accounts receivables 4889783 3588798 415397

Financial instruments 83339

Total financial assets 20062331 26860564 31706408

Debt

Short and long term debt/borrowings

Financial instruments 47412

Total debt 47412

Net financial assets 20062331 26860564 31658996

The carrying value of the cash and cash equivalents and the accounts receivables approximates fair value

because of their short-term nature

We regularly review all our financial assets for impairment There were no impairments recognized in 2011

2010 and 2009

Derivative Instruments and Hedging Activities

In determining fair value we utilize valuation techniques that maximize the use of observable inputs and

minimize the use of unobservable inputs to the extent possible as well as consider our own and counterparty

credit risk At December 31 2011 and 2010 we did not have any assets or liabilities that utilize Level inputs

The valuation of our foreign exchange derivatives are based on the market approach using observable market

inputs such as forward rates and incorporate non-performance risk the credit standing of the counterparty when

the derivative is in net asset position and the credit standing of the Company when the derivative is in net

liability position Our derivative assets are categorized as Level

At December 31 20112010 nil we had outstanding contracts with notional amount of US$4.0 million

The fair value of these contracts at December 31 20112010 nil was an asset of A$83339 recorded as

Financial Instruments in consolidated balance sheet As of December 31 2011 substantially all of the

derivative gain recognized in accumulated other comprehensive income AOCI will be recognized in earnings

within the next 12 months No amount of ineffectiveness was recorded in earnings for these designated cash flow

hedges for the year ended December 31 20112010 nil For further details see Notes to Consolidated Financial

Statements Note Summary of Significant Accounting Policies

F-32

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

Property Plant and Equipment

As of December 31

2011 2010

Plant and equipment 18893890 15110554

Leasehold improvements 8722639 8810036

Capital work in process 5534498 8792690

33151027 32713280

Accumulated depreciation 12855847 9586365

Property plant equipment net 20295180 23126915

Capital work in process relates to assets under construction and comprises primarily of specialized

manufacturing equipment Legal right to the assets under construction rests with the Company The amounts

capitalized for capital work in process represents the percentage of expenditure that has been completed and

once the assets are placed into service the Company begins depreciating the respective assets The accumulated

amortisation of capitalised leasehold improvements for the fiscal years ended December 31 2011 2010 and 2009

was A$5376432 A$4090724 and A$2770434 respectively

The Company receives Victorian government grants under certain research agreements to purchase plant

and equipment Plant and equipment is presented net of the government grant of A$68022 for the year ended

December 31 20112010 A$449875 The grants are recognized against the acquisition costs of the related

plant and equipment as and when the related assets are purchased Grants received in advance of the relevant

expenditure are treated as deferred income and included in Current Liabilities on the balance sheet as the

Company does not control the monies until the relevant expenditure has been incurred Grants due to the

Company under research agreements are recorded as Currents Assets on the consolidated balance sheets

Depreciation expense was A$3298541 A$2990858 and A$285 1285 for the fiscal years ended

December 31 2011 2010 and 2009 respectively

Accrued Expenses

Accrued expenses consist of the following

As of December 31

2011 2010

A$

Legal tax and accounting fees 511121 591184

Salary and related costs 706053 587695

Research and development materials 35050 120000

Production materials 786708 657142

Other 22596 143456

2061528 2099477

10 Stockholders Equity Common Stock

Holders of common stock are generally entitled to one vote per share held on all matters submitted to vote

of the holders of common stock At any meeting of the shareholders the presence in person or by proxy of the

F-33

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

majority of the outstanding stock entitled to vote shall constitute quorum Except where greater percentage is

required by the Companys Amended and Restated Certificate of Incorporation or By-laws the affirmative vote

of the holders of majority of the shares of common stock then represented at the meeting and entitled to vote at

the meeting shall be sufficient to pass resolution Holders of common stock are not entitled to cumulative

voting rights with respect to the election of directors and the common stock does not have pre-emptive rights

Trading in our shares of common stock on ASX is undertaken using CHESS Depositary Interests

CDIs Each CDI represents beneficial ownership in one underlying share Legal title to the shares underlying

CDIs is held by CHESS Depositary Nominees Pty Ltd CDN wholly owned subsidiary of ASX

Holders of CDIs have the same economic benefits of holding the shares such as dividends if any bonus

issues or rights issues as though they were holders of the legal title Holders of CDIs are not permitted to vote but

are entitled to direct CDN how to vote Subject to Delaware General Corporation Law dividends may be

declared by the Board and holders of common stock may be entitled to participate in such dividends from time to

time

11 Retirement Benefits

Universal Biosensors Pty Ltd contributes to standard defined contributions superannuation funds on behalf

of all employees at an amount up to nine per cent of employee salary The Company permits employees to

choose the superannuation fund into which the contributions are paid provided the fund is appropriately

registered

Universal Biosensors Pty Ltd contributed A$806l58 A$714l23 and A$698919 for the fiscal years ended

December 31 2011 2010 and 2009 respectively

12 Net Profit/Loss per Share

Basic net profitlloss per ordinary share was computed by dividing the net profit/loss applicable to

common stock by the weighted-average number of common stock outstanding during the period Options granted

to employees under the Universal Biosensors Employee Option Plan are considered to be potential ordinary

shares for the purpose of calculating diluted net profitlloss per share However all these were not included in

the calculation of diluted net profit/loss per share in the year when the Group made net loss as the effect of

including them is anti-dilutive

Years Ended December 31

2011 2010 2009

Weighted average shares used as denominator in

calculating

Basic net profitlloss per share 159017777 157584044 157013578

Diluted net profitiloss per share 159017777 157584044 161354802

13 Guarantees and Indemnifications

The certificate of incorporation and amended and restated by-laws of the Company provide that the

Company will indemnify officers and directors and former officers and directors in certain circumstances

including for expenses judgments fines and settlement amounts incurred by them in connection with their

services as an officer or director of the Company or its subsidiaries provided that such person acted in good faith

and in manner such person reasonably believed to be in the best interests of the Company

F-34

Universal Biosensors Inc

Notes to Consolidated Financial Statements

for the years ended December 31 2009 2010 and 2011

In addition to the indemnities provided in the certificate of incorporation and amended and restated by-laws

the Company has entered into indemnification agreements with certain of its officers and each of its directors

Subject to the relevant limitations imposed by applicable law the indemnification agreements among other

things

indemnify the relevant officers and directors for certain expenses judgments fines and settlement

amounts incurred by them in connection with their services as an officer or director of the Company or its

subsidiaries and

require the Company to make good faith determination whether or not it is practicable to maintain

liability insurance for officers and directors or to ensure the Companys performance of its

indemnification obligations under the agreements

The Company maintains directors and officers liability insurance providing for the indemnification of our

directors and certain of our officers against certain liabilities incurred as director or officer including costs and

expenses associated in defending legal proceedings In accordance with the terms of the insurance policy and

commercial practice the amount of the premium is not disclosed

No liability has arisen under these indemnities as at December 31 2011

14 Segments

The Company operates in one segment The principal activities of the Company are research and

development commercial manufacture of approved medical or testing devices and the provision of services

including contract research work

The Company operates predominantly in one geographical area being Australia

15 Deed of Cross Guarantee

Universal Biosensors Inc and its wholly owned subsidiary Universal Biosensors Pty Ltd are parties to

deed of cross guarantee under which each company guarantees the debts of the other By entering into the deed

the wholly-owned entity has been relieved from the requirements to prepare financial report and directors

report under Class Order 98/1418 as amended issued by the Australian Securities and Investments Commission

The above companies represent Closed Group for the purposes of the Class Order and as there are no

other parties to the Deed of Cross Guarantee that are controlled by Universal Biosensors Inc they also represent

the Extended Closed Group

The consolidated financial statements presented within this report comprise that of Universal Biosensors

Inc and its wholly owned subsidiary Universal Biosensors Pty Ltd These two entities also represent the Closed

Group and the Extended Closed Group

F-35

Universal Biosensors Inc

Schedule ii Valuation and Qualifying Accounts

for the years ended December 31 2009 2010 and 2011

Additions

Balance at Charged to Charged to

Beginning of Costs and Other Balance at

Period Expenses Accounts Deductions end of Period

A$ A$ A$ A$ A$

Year ended December 31 2009

Deferred income tax valuation allowance 10601120 2998487 1899796 11699811

Year ended December 31 2010

Deferred income tax valuation allowance 11699811 1896668 372305 13968784

Year ended December 31 2011

Deferred income tax valuation allowance 13968784 4357503 30161 18356448

F-36

ASX Additional Information

Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows

The information is current as at March 2012

Distribution of equity securities

As at March 2012 there were

158991 999 fully paid shares of common stock held by CHESS Depositary Nominees Pty Ltd on behalf of 1405 individual

holders of CDIs All issued shares of common stock carry one vote per share and carry the rights to dividends

154214 unquoted fully paid restricted shares of common stock held by 77 individual employees of the Company All issued

shares of common stock carry one vote per share and carry the rights to dividends

11258290 options over shares of common stock held by 87 individual option holders

The Companys shares of common stock are traded on Australian Securities Exchange in the form of CHESS Depositary

Interests or CDls CHESS Depositary Nominees Pty Ltd wholly owned subsidiary of Australian Securities Exchange Ltd

holds legal title in the Companys shares of common stock on behalf of holders of CDIs The following table sets out the

beneficial interests in the underlying shares of common stock rather than legal title

Beneficial interests in shares of Beneficial interests in restricted Options over shares

common stock traded as CDIs emrlovee shares of common stock of common stockHolding ranges

11000 163

1001 5000 312 77

5001 10000 249

10001 100000 582 66

100001andover 99 21

1405 77 87

There are 88 holders of CDIs with less than marketable parcel

Holders of CDIs holding greater than 5%

Beneficial interests in shares of common stock

Name Number Percentage

The Principals Cornerstone Fund Pty Limited 18651 074 1.731

CM Capital Investments Pty Ltd 17794384 11.192

HSBC Custody Nominees Australia Limited 15004946 9.438

PFM Cornerstone Limited 1883018 7.474

Cogent Nominees Pty Limited 8500000 5.346

Shares held on trust for Messrs Denver Hanley and Dr Adam

Universal Biosensors Inc 78

Twenty largest holders of quoted equity securities

Beneficial interests in shares of common stock

Name Number Percentage

The Principals Cornerstone Fund Pty Limited 18651074 11719

CM Capital Investments Pty Ltd 17794384 11.181

HSBC Custody Nominees Australia Limited 15004946 9.428

PFM Cornerstone Limited 11883018 7.467

Cogent Nominees Pty Limited 8500000 5.341

Aust Executor Trustees SA Ltd Tea Custodians Limited 7943933 4.992

Kaasim Pty Ltd 7782636 4.890

National Nominees Limited 6127163 3.850

JP Morgan Nominees Australia Limited 4228243 2.657

10 Equity Trustees Limited 2903930 1.825

11 Citicorp Nominees Pty Limited 2892988 1.818

12 Mr Denis Michael Hanley 2313230 1.454

13 Dr Alastair Mclndoe Hodges 2059085 1.294

14 Garry Chambers 1761424 1.107

15 Mr Thomas William Beck Mrs Lynne Carol Beck 1738387 1.092

16 Warragai Investments Pty Ltd 1500000 0.943

17 Ronald Chatelier 1279421 0.804

18 Mr Andrew Denver Mrs Linda Denver 1181812 0.743

19 Mr Christopher La Croix Mrs Kathleen La Croix 1166718 0.733

20 Equity Trustees Limited 1154795 0.726

110644075 74.062

159146213

Shares held on trust for Messrs Denver Hanley and Dr Adam

Restricted Securities

As at March 2012 there are 154214 fully paid restricted shares of common stock issued to 77 Company employees

pursuant to the terms and conditions of the Universal Biosensor Inc employee share plan The restricted shares are not able to

be traded until the earlier of the following three years from the date on which the shares are issued or ii the date on which

an employee ceases to be an employee of Universal Biosensors Inc and its associated group of companies

79 Universal Biosensors Inc

This page has been left blank intentionafly

Corporate Directory

Board of Directors

Mr Paul Wright CEOMr Andrew Denver Chairman

Dr Cohn Adam

Mr Denis Hanley

Mr Marshall Heinberg

Mr Andrew Jane

Dr Elizabeth Jane Wilson

Registered Office in Australia

Corporate Avenue

Rowville Victoria 3178

Australia

Telephone 61 9213 9000

Facsimile 61 9213 9099

Email info@universalbiosensors.com

Website www.universajbiosensors.com

ASX code UBI

Name and address of Universal Biosensors

registered agent in the United States

Corporation Service Company

2711 Centerville Road Suite 400

Wilmington County of New Castle

Delaware Unites States of America

Share Registry

Boardroom Pty Limited

Level 207 Kent Street

Sydney New South Wales 2000

Australia

Telephone 61 9290 9600

Facsimile 61 9279 0664

Email enquiries@boardroomlimited.com.au

Website www.boardroomlimited.com.au

Auditor

PricewaterhouseCoopers LLP

Darling Park Tower

201 Sussex Street

Sydney New South Wales 2000

Australia

Australian Legal Adviser

PFM Legal Pty Ltd

Level 12

117 York Street

Sydney New South Wales 2000

Australia

US Legal Adviser

Venable LLP

575 7th Street NW

Washington DC 20004

United States of America

Universal Biosensors